clearn.png
Wednesday April 1st, 2020 8:22PM

International forum: Don't expect cheap money to do it all

By The Associated Press
Related Articles
  Contact Editor

FRANKFURT, Germany (AP) — Stocks have risen on expectation of more help from central banks, but an international financial forum warned Sunday that the global recovery can't just rely on support from the likes of the U.S. Federal Reserve and the European Central Bank to get past its current shaky stretch.

The admonition from the Bank for International Settlements comes as the Fed and the ECB are signaling that more stimulus could be on the way. That message from Fed chair Jay Powell and ECB head Mario Draghi has helped send stock higher in Europe and the S&P 500 in the U.S. to a record high.

The BIS is cautioning that governments need to bring other policies into the game — and that there are risks in relying too much on central bank stimulus such as cuts in interest rates and bond purchases that lower market borrowing costs. Those other policies include government spending where possible on growth-friendly infrastructure as well as pro-growth reforms such as slashing red tape for business.

"Monetary policy can no longer be the main engine of economic growth, and other policy drivers need to kick in to ensure the global economy achieves sustainable momentum," the BIS said in its annual economic report.

BIS General Manager Agustin Carstens warned that while stimulus can help in the short run, it can have side effects further out such as over-inflating asset prices such as stocks and bonds, and feeding less productive zombie firms that wouldn't survive without cheap borrowing.

Policymakers, he said, need "to be mindful of all those tradeoffs."

The BIS, a forum for central banks based in Basel, Switzerland, said the service industries and falling unemployment can shore up the ailing global recover in coming months. Rising wages and less unemployment are offsetting a slowdown in manufacturing and global trade.

Still, it said significant risks remain, notably related to trade tensions between the U.S. and China. U.S. President Donald Trump is seeking to reduce China's trade surplus and has imposed new tariffs, or import taxes, while negotiating for a trade deal. Despite some apparent progress at a meeting between Trump and Chinese President Xi Jinping at the summit of leaders from the Group of 20 countries in Osaka, Japan, there's uncertainty about the outcome, and whether more tariffs might be coming.

"The trade tensions bring up questions about the viability of existing supply chain structures and the very future of the global trading system," Carstens said in a speech to the BIS annual meeting Sunday. "It bears repeating: trade wars have no winners, only losers.

Another risk he identified is high levels of corporate debt.

Carstens pointing to "clear signs of overheating in the corporate sector in a number of advanced countries." He called attention to the $3 trillion market in so-called leveraged loans — those that are made to already indebted companies and then often sliced up and sold on to investors.

"Credit standards have been declining as investors have searched for yield," he said. "Should the leveraged loans sector deteriorate, the economic impact could be amplified through the banking system."

  • Associated Categories: Associated Press (AP), AP National News, AP Online National News, Top General short headlines, AP World News, AP Business, AP Business - Economy, AP Business - Industries, AP Business - Financial Services
© Copyright 2020 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
SKoreans react with hope, skepticism over Trump-Kim meeting
South Koreans have watched the latest meeting between President Donald Trump and North Korean leader Kim Jong Un with a mixture of hope and skepticism
7:03AM ( 14 minutes ago )
Wide grins and historic handshake for Trump, Kim at DMZ
It was to be an impromptu exchange of pleasantries, but President Donald Trump and North Korea's Kim Jong Un turned their historic handshake at the Demilitarized Zone into a 50-minute meeting and agreed to revive talks on the North's nuclear program.
6:46AM ( 31 minutes ago )
Albania holds local elections amid political turmoil
Albanians have started to cast ballots to elect mayors and city councils, or parliaments amid a tense political conflict with the opposition boycotting the municipal elections
6:44AM ( 34 minutes ago )
Associated Press (AP)
Trump becomes 1st US leader to step into NKorea, meets Kim
With grins and handshakes, President Donald Trump welcomed North Korea's Kim Jong Un at the heavily fortified Demilitarized Zone Sunday, seeking to revive talks on the pariah nation's nuclear program in a bid for a legacy-defining accord
3:06AM ( 4 hours ago )
Trump visits DMZ for meeting with North Korea's Kim
President Donald Trump has arrived at the Korean Demilitarized Zone for a historic meeting with North Korea's Kim Jong Un
2:37AM ( 4 hours ago )
Trump arrives at DMZ for meeting with North Korea's Kim
President Donald Trump has arrived at the Korean Demilitarized Zone for a historic meeting with North Korea's Kim Jong Un
2:10AM ( 5 hours ago )
AP World News
Schumer: ATF should investigate Dominican Republic deaths
The Senate's top Democrat says the federal government must do more to investigate the deaths of Americans who traveled to the Dominican Republic
2:09AM ( 5 hours ago )
Savannah poverty numbers slow to drop despite services
For 39-year old Juanita Porter, the last few weeks have been a juggling act
12:05AM ( 7 hours ago )
Cease-fire in US-China trade war doesn't bridge differences
Tensions between the U.S. and China over trade have been eased a bit by an agreement to return to talks, but issue of China's aggressive push to challenge American technological dominance remains
9:52PM ( 9 hours ago )
AP Business
Trump, Xi hit reset button on trade but long slog awaits
Trump, Xi agree to restart stalled trade talks, but difficult issues await negotiators
12:17PM ( 19 hours ago )
The Latest: Abe, Putin announce initiatives to expand ties
Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin have announced new initiatives to further expand economic ties and tourist exchanges between the two nations, but have made no visible progress on a decades-long territorial dispute
11:13AM ( 20 hours ago )
Truce in US-China trade war as 2 rivals seek breakthrough
President Donald Trump says U.S. tariffs will remain in place against Chinese imports while negotiations continue between the economic powers
10:24AM ( 20 hours ago )
AP Business - Economy
Dutch farm floats possibilities of urban dairy production
A new floating farm has opened in a corner of Rotterdam's busy harbor and is showcasing what its creator calls a sustainable way of producing dairy in the world's busy cities
1:44PM ( 17 hours ago )
Rebuked by many, Saudi crown prince feted at G20 summit
Rebukes are piling up elsewhere for the Saudi crown prince, but you wouldn't have known it by the lavish public reception the prince has received this week at the G-20 summit
8:30AM ( 22 hours ago )
Order: Abortions can continue at Missouri's lone clinic
A Missouri commissioner says the state's only abortion clinic can continue providing the service as a fight over its license plays out
12:00AM ( 1 day ago )
AP Business - Industries
Banks announce billions in share buybacks after Fed approval
Federal Reserve approves all capital plans for the nation's 18 largest banks, allowing big banks to increase their dividends and buy back more shares
6:00PM ( 2 days ago )
US long-term mortgage rates fall; 30-year loan at 3.73%
US long-term mortgage rates fall; 30-year loan average at 3.73%
12:13PM ( 2 days ago )
Future is in doubt for cheaper versions of biologic drugs
Sales of biosimilars, cheaper near-copies of pricey biologic drugs, have been so limited in the U.S. that their future is in doubt.
10:46AM ( 2 days ago )
AP Business - Financial Services
SKoreans react with hope, skepticism over Trump-Kim meeting
South Koreans have watched the latest meeting between President Donald Trump and North Korean leader Kim Jong Un with a mixture of hope and skepticism
7:03AM ( 15 minutes ago )
Wide grins and historic handshake for Trump, Kim at DMZ
It was to be an impromptu exchange of pleasantries, but President Donald Trump and North Korea's Kim Jong Un turned their historic handshake at the Demilitarized Zone into a 50-minute meeting and agreed to revive talks on the North's nuclear program.
6:46AM ( 32 minutes ago )
Albania holds local elections amid political turmoil
Albanians have started to cast ballots to elect mayors and city councils, or parliaments amid a tense political conflict with the opposition boycotting the municipal elections
6:44AM ( 34 minutes ago )
The Latest: Trump ends eventful trip to Asia, heads home
President Donald Trump is on his way back to Washington after a four-day trip to Asia during which he became the first American president to set foot in North Korea
6:18AM ( 1 hour ago )
Trump administration agrees to delay health care rule
Trump administration agrees to postpone implementing "conscience" rule that would protect health care workers who object to procedures on moral or religious grounds
6:08AM ( 1 hour ago )