In July 2018, the Bank for International Settlements (BIS) asked whether the world was heading towards a perfect financial storm.
With the US stock market heading for record highs even as emerging markets like Argentina and Turkey were running into foreign exchange problems.
Twenty years after the Asian financial crisis of 1997–98 and the global financial crisis of 2007–08, storm clouds are gathering once again.
Conventional economic models failed to predict the last two crises because the technical definition of financial risk is measured volatility.
The global financial crises proved that current models of financial risk, largely used by banks and financial regulators, are totally blind to Black Swan or Grey Rhino events of unmeasurable uncertainty.
This time round, the consensus is that the Grey Rhino (an event with high probability and high impact, but where the trigger is uncertain) is the looming rise in US interest rates in response to a domestic economy that is running at nearly full capacity, with low unemployment levels and signs of creeping inflation.
As the BIS has warned, non-financial borrowers outside the United States owe US$11.5 trillion dollars, of which US$3.7 trillion is owed by emerging markets.
Global financial fragility comes from two structural imbalances
First, the United States is the leading deficit country in terms of trade and debt, owing the world a net US$7.7 trillion, or 39.8 per cent of GDP.
This amount is growing because of rising fiscal debt and the low level of national savings.
Second, below-par global growth since 2008 has been underwritten almost completely by central bank unconventional monetary policies, which have brought interest rates to an unsustainably low level.
Market fears that the large central banks will withdraw quantitative easing — QExit — threaten to jeopardise the current frail recovery, which is why US President Donald Trump is also against the Federal Reserve raising interest rates.
If geopolitical risks trump financial risks, what could go wrong in the coming months?
Western analysts think that the trigger will be a Chinese debt meltdown. But Chinese debt is internal debt, as China has foreign exchange reserves equivalent to 188 per cent of its foreign debt and still runs a current account surplus.
China’s debt problem is an internal debt issue, very much like that of Japan. While Japanese debt is owed largely to Japanese households, Chinese debt is largely owed by state-owned enterprises and local governments to state-owned banks. In such a situation, China is well positioned to rewrite its national balance sheet, a privilege not possible for more privately dominated markets.
Financial risks are rising not just in China, but globally
Dun and Bradstreet’s Global Risk Matrix, published in May 2018, suggested that US interest rate rises could trigger a fresh debt crisis, sending the global economy into contraction.
Echoing this sentiment, the International Monetary Fund’s July 2018 World Economic Outlook argued that rising trade tensions are threatening growth recovery in Europe, Japan and Britain more than predicted.
Any overheating in the United States would trigger currency crises for some emerging markets.
In short, we cannot separate financial risks from geopolitical risks. Any unforeseen event arising from a geopolitical miscalculation, climate change disaster, war or cyber-induced disruption could trigger another round of financial crises.
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National News Bureau Of Thailand
BANGKOK (NNT) – The Commerce Ministry has launched measures to increase rice exports to 6 million tons this year, valued at around 150 billion baht, with Indonesia, China, Bangladesh and Iraq set to be the main markets under government-to-government (G2G) deals.
Commerce Minister Jurin Laksanawisit said G2G deals and a campaign to make Thai rice more recognizable around the world will spearhead efforts to increase the export volume from last year’s 5.7 million tons.
He said the ministry is working with the Thai Rice Exporters Association to promote Thai rice under the “Think Rice, Think Thailand” campaign, adding that Thailand successfully made Thai rice become better known in Canada, increasing its exports to the country by 21% to 120,000 tons last year.
Mr Jurin said one of the distinctive characteristics of Thai rice is its very low sugar content. This would make it the preferred choice among Canadians as 28% of the Canadian population has high blood sugar levels.
Bangkok Metropolitan Energy Authority (MEA) partners with Chineses owned Newsky Energy (Thailand) Company
The MEA has signed a Memorandum of Understanding with private firm Newsky Energy Thailand on co-investment arrangements for waste-to-energy power plants in the Nong Khaem and On Nut districts of Bangkok, a project costing about 10 billion baht.
MEA Governor Kirapat Jiamset, said today that each of the waste-to-energy plants will have a generating capacity of 35 megawatts of electricity using 1,000 tons of waste as fuel each day.
Mr Kirapat said the two power plants will be introduced along with the smart grid system, which allows communities in service areas to receive power entirely from these plants, independent of the main power lines.
New Sky Energy Thailand CEO He Ning said the company has been working with the Bangkok Metropolitan Administration to operate a waste-to-energy incinerator at Nong Khaem dump, which converts 500 tons of garbage into electricity each day.
Operating since 2016, Mr Ning said the incinerator has been continuously feeding electricity to the MEA, with systems in place to take care of the environment and nearby communities.
The proposed new waste-to-energy plants are currently in the public consultation process. The construction of these projects is expected to commence later this year, and come online in the electricity grid in 2024.
According to the Department of Business Development, Newsky Energy (Thailand) Company Limited is currently registered as an electric power generation and transmission company in Thailand. The company is 100% owned by Chinese investors and reported a -7.25% net profit in the fiscal year 2019.
Thailand sets export growth target at 4% for 2021
BANGKOK (NNT) – Thailand has seen export growth of 0.35 per cent in the first month of the year. The Commerce Minister has ordered the Department of International Trade Promotion to advance an action plan to accelerate growth, which is set at 4 per cent this year.(more…)
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