Patrick Bond ([email protected])1 US reversion to high interest rate regime during 1980s-90s Source:...
-
Upload
dana-mosley -
Category
Documents
-
view
217 -
download
0
Transcript of Patrick Bond ([email protected])1 US reversion to high interest rate regime during 1980s-90s Source:...
![Page 1: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/1.jpg)
Patrick Bond ([email protected]) 1
US reversion to high interest rate regime during 1980s-90s
Source: Gerard Duminil and Dominique Levy
VOLCKER INTEREST RATE SHOCK
![Page 2: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/2.jpg)
Patrick Bond ([email protected]) 2
Rest of world profoundly affected:
Real interest rate as experienced in Third World
Source: Gerard Duminil and Dominique Levy
VOLCKER INTEREST RATE SHOCK
![Page 4: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/4.jpg)
Patrick Bond ([email protected]) 4
Dubious statistics:Correcting the GDP bias
(global)
Source: Redefining Progress, San Franciscso
![Page 5: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/5.jpg)
Patrick Bond ([email protected]) 5
Especially low growth since 1980, andextremely uneven development
Dramatic differences in annual % change of per capita GDP (note: constant 1995$, not PPP values) Source: Alan Freeman
1980-2000
1970-1980
-15%
-10%
-5%
0%
5%
10%
Ann
ual p
erce
nt g
row
th in
GD
P pe
r cap
ita o
ver t
he g
iven
per
iod
Major industrial countries
Other advanced economies
Developing
Countries in Transition
GDP per capita in 1995 dollars, 1982-2000
1982 2000Rest of the World 1,457 1,116Advanced or Advancing Countries 15,383 26,134
![Page 6: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/6.jpg)
Patrick Bond ([email protected]) 6
Trends in capital accumulation:Did the after-tax profit rate recover?
US corporate profit rate appears to recover from 1984;
but interest payments remain at record high levels;
subtract interest expenses -- net revenue is very low during 1980s-90s.
Source: Gerard Dumenil and Dominique Levy
VOLCKER SHOCK
![Page 7: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/7.jpg)
Patrick Bond ([email protected]) 7
Corporations spent 1980s-90spaying off historically high debt
Source: Gerard Dumenil and Dominique Levy
![Page 8: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/8.jpg)
Patrick Bond ([email protected]) 8
Source of profits changedduring globalisation/finance era
US corporate profits came far less from manufacturing products;
much greater sources of profits came from abroad;
profits also came more from financial assets.
Source: Gerard Dumenil and Dominique Levy
![Page 9: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/9.jpg)
Patrick Bond ([email protected]) 9
Credit/stock market bubbles:US financial profits and
vulnerability
Source: Gerard Dumenil and Dominique Levy
VOLCKER SHOCK
![Page 10: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/10.jpg)
Patrick Bond ([email protected]) 10
US financiers doubled in asset-value relative to non-financial
corporations
Source: Gerard Dumenil and Dominique Levy
![Page 11: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/11.jpg)
Patrick Bond ([email protected]) 11
US rentiers grabbed much more of the national income
Source: Gerry Epstein and Dorothy Power
VOLCKER SHOCK
![Page 12: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/12.jpg)
Patrick Bond ([email protected]) 12
Another feature of the credit bubble:
Is US household debt sustainable?
Source: Gerard Dumenil and Dominique Levy
![Page 13: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/13.jpg)
Patrick Bond ([email protected]) 13
Are US households now so indebted that they cannot save?
Source: Gerard Dumenil and Dominique Levy
![Page 14: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/14.jpg)
Patrick Bond ([email protected]) 14
US stock market bubblescorrected for earnings
US price-earnings ratios (black line) show herd movements red line is based upon 10-year earnings averages (as per Shiller),
which highlight 30-35 year cycles of extreme overvaluation
Source: Michael Alexander
![Page 15: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/15.jpg)
Patrick Bond ([email protected]) 15
US stock market cyclecorrected for accumulated resources
By considering share prices in relation to firm ‘resources’ (accumulated earnings), a clearer picture emerges of valuation -- and overvaluation
Source: Michael Alexander
![Page 16: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/16.jpg)
Patrick Bond ([email protected]) 16
Implications of the 2000 crash:US pension shortfalls (demographics important too)
Source: International Monetary Fund Global Financial Stability Report 2004, p.90
Fortune 500 pension assets in relation to pension benefit obligations (PBOs)
Stock market and US bond yields
DOT COM BUBBLE BURST
![Page 17: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/17.jpg)
Patrick Bond ([email protected]) 17
With stock market crash,falling household assets…
Source: Papdamitrou, Shaikh, dos Santos and Zessa, Jerome Levy Institute, Bard College
DOT COM BUBBLE BURST
![Page 18: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/18.jpg)
Patrick Bond ([email protected]) 18
… but housing prices keptasset values high
Source: Robert Brenner
![Page 19: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/19.jpg)
Patrick Bond ([email protected]) 19
… thanks to mortgage refinancings:
Interest rates declined following Asian crisis
Source: NY Federal Reserve Bank
![Page 20: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/20.jpg)
Patrick Bond ([email protected]) 20
An indication of a housing bubble:
Asset prices soar above rental rates
Source: Center for Economic Policy Research
![Page 21: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/21.jpg)
Patrick Bond ([email protected]) 21
What might housing crash mean for the rest of the economy?
Source: Robert Brenner
DOT COM BUBBLE BURST
![Page 22: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/22.jpg)
Patrick Bond ([email protected]) 22
Another speculative market: energy (potentially crucial in future, given fossil fuel exhaustion and carbon
trading)
Source: International Monetary Fund Global Financial Stability Report 2004, pp.59-60
Market volatility – energy in comparison
# of energy options/futures traded
![Page 23: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/23.jpg)
Patrick Bond ([email protected]) 23
Energy market volatility:electricity and oil prices
Source: International Monetary Fund Global Financial Stability Report 2004, p.63
![Page 24: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/24.jpg)
Patrick Bond ([email protected]) 24
US trade and current account deficits
Source: Gerard Dumenil and Dominique Levy
![Page 25: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/25.jpg)
Patrick Bond ([email protected]) 25
Danger ahead: while US wins from global investment, it is
vulnerable
Source: Gerard Dumenil and Dominique Levy
![Page 26: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/26.jpg)
Patrick Bond ([email protected]) 26
Financial crashes in other economies:
Asia was looted, 1997-98; US ‘won’
Source: Federal Reserve Bank of NY
financial crash of Thailand, Malaysia, Indonesia, and S.Korea: massive bank outflow
(‘other flows’), which soon reached the US;
dramatic decline in Asian currency values;
decline in Asian imports from US, and rise in exports to US…
![Page 27: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/27.jpg)
Patrick Bond ([email protected]) 27
US trade benefits from East Asian crisis:
currency-induced import boom
Source: Federal Reserve Bank of NY
![Page 28: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/28.jpg)
Patrick Bond ([email protected]) 28
US trade benefits from global power structure: Falling commodity prices and
‘unequal exchange’
0
200400
600
8001000
1200
1400
16001800
2000
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
volume of unequalexchange (T-value)
point estimates byAmin, Kohler
Source: Gernot Kohler
![Page 29: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/29.jpg)
Patrick Bond ([email protected]) 29
Reflective of commodity export trends:
globalisation’s falling minerals and agricultural prices
![Page 30: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/30.jpg)
Patrick Bond ([email protected]) 30
But worsening US current account reflects net trade/investment
deficits
Source: Papdamitrou, Shaikh, dos Santos and Zessa, Jerome Levy Institute, Bard College
![Page 31: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/31.jpg)
Patrick Bond ([email protected]) 31
To compensate:Dramatic shifts in US capital
flows
Source: International Monetary Fund Global Financial Stability Report 2004, Table 1
HUGE DECLINE IN INWARD FDI
SLOWDOWN OF OUTWARD FDI AND PORTFOLIO INVESTMENT
![Page 32: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/32.jpg)
Patrick Bond ([email protected]) 32
Financing of US capital inflows
Source: International Monetary Fund Global Financial Stability Report 2004, p.148
![Page 33: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/33.jpg)
Patrick Bond ([email protected]) 33
Foreign purchases of US financial assets:
Net by type, and accumulated foreign owned
Source: International Monetary Fund Global Financial Stability Report 2004, p.20,36
![Page 34: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/34.jpg)
Patrick Bond ([email protected]) 34
Recent global economic volatilitySize of int’l capital markets, 2003 (US$
billions)
Source: International Monetary Fund Global Financial Stability Report 2004, Table 3
![Page 35: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/35.jpg)
Patrick Bond ([email protected]) 35
Recent financial/currency upheavals:
Stock market index changes
Source: International Monetary Fund Global Financial Stability Report 2004, Table 10
GLOBAL MARKET CRASHREVIVAL OF STOCK MARKETS
![Page 36: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/36.jpg)
Patrick Bond ([email protected]) 36
Stock market volatility, 2000-04 (% change by period)
Source: International Monetary Fund Global Financial Stability Report 2004, Table 10 = STOCK MARKET CRASH OF 1/3
![Page 37: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/37.jpg)
Patrick Bond ([email protected]) 37
US mutual funds flowed back to Wall Street
Source: International Monetary Fund Global Financial Stability Report 2004, Table 2
SWITCH INTO CORPORATE FUNDS
SWITCH OUT OF INT’L FUNDS
![Page 38: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/38.jpg)
Patrick Bond ([email protected]) 38
Lower US issuance of newinternational debt securities (US$ billions)
Source: International Monetary Fund Global Financial Stability Report 2004, Table 2
EURO TAKES LEAD OVER $
![Page 39: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/39.jpg)
Patrick Bond ([email protected]) 39
Outstanding international debt securities (US$ billions)
Source: International Monetary Fund Global Financial Stability Report 2004, Table 2
EURO TAKES LEAD OVER $
![Page 40: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/40.jpg)
Patrick Bond ([email protected]) 40
New international syndicated credit facilities, by currency (US$ bns)
Source: International Monetary Fund Global Financial Stability Report 2004, Table 2
DECLINE FROM US, EUROPE
![Page 41: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/41.jpg)
Patrick Bond ([email protected]) 41
Volatility and dangers persist Huge growth of exchange-traded financial derivatives, 1987-
2003
Source: International Monetary Fund Global Financial Stability Report 2004, Table 6
INTEREST RATE BETS RISE
![Page 42: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/42.jpg)
Patrick Bond ([email protected]) 42
Increase in over-the-counterderivatives (US$ billions)
Source: International Monetary Fund Global Financial Stability Report 2004, Table 4
INTEREST RATE BETS SOAR
![Page 43: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/43.jpg)
Patrick Bond ([email protected]) 43
Over-the-counter derivatives:notional amount, by currency
Source: International Monetary Fund Global Financial Stability Report 2004, Table 5
EURO TAKES LEAD OVER $
![Page 44: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/44.jpg)
Patrick Bond ([email protected]) 44
Emerging market turbulence:Falling capital inflows, rising
outflows
Source: International Monetary Fund Global Financial Stability Report 2004, Table 1
E.ASIA CRISIS
SUSTAINED NET OUTFLOWS
![Page 45: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/45.jpg)
Patrick Bond ([email protected]) 45
As portfolio finance inflows decline, hedge funds take lead over mutual
funds
Source: International Monetary Fund Global Financial Stability Report 2004, p.149
![Page 46: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/46.jpg)
Patrick Bond ([email protected]) 46
Emerging market currency turbulence:
US$ v. Latin American and Asian currencies
Source: International Monetary Fund Global Financial Stability Report 2004, Table 11
3 SUCCESSFUL $ PEGS WITH CURRENCY CONTROLS:
3 SERIOUS CRASHES:
![Page 47: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/47.jpg)
Patrick Bond ([email protected]) 47
Emerging market currencies v. US$:
Latin America and Asia, % change
Source: International Monetary Fund Global Financial Stability Report 2004, Table 11
3 SERIOUS CRASHES:
![Page 48: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/48.jpg)
Patrick Bond ([email protected]) 48
Emerging market currencies v. US$:
Europe, Middle East, Africa
Source: International Monetary Fund Global Financial Stability Report 2004, Table 11
2 MORE SERIOUS CRASHES:
![Page 49: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/49.jpg)
Patrick Bond ([email protected]) 49
Emerging market currencies v. US$:Europe, Middle East and Africa, %
change
Source: International Monetary Fund Global Financial Stability Report 2004, Table 11
2 MORESERIOUSCRASHES:
AND FOUR EXCESSIVECORRECTIONS
![Page 50: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/50.jpg)
Patrick Bond ([email protected]) 50
Emerging markets’stock market volatility
Source: International Monetary Fund Global Financial Stability Report 2004, Table 15
9/11 FALLOUT
ASIAN FINANCIAL CRISIS
30-day rolling volatility index, measured by Morgan Stanley
![Page 51: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/51.jpg)
Patrick Bond ([email protected]) 51
Emerging markets’ stock market volatility(index by sector)
Source: International Monetary Fund Global Financial Stability Report 2004, Table 10
HIGH
HIGH
LOW
HIGH
LOW
HIGH
HIGH
LOW
NEGATIVE
LOW
![Page 52: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/52.jpg)
Patrick Bond ([email protected]) 52
Emerging market bond returns (20 July 2004, basis points)
Source: International Monetary Fund Global Financial Stability Report 2004, Table 12
Highest returns: Nigera, Bulgaria, Ecuador, Panama, Peru, Russia, Venezuela (4%+)
![Page 53: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/53.jpg)
Patrick Bond ([email protected]) 53
Emerging market bond market (local) interest rate spreads,
2000-04
Source: International Monetary Fund Global Financial Stability Report 2004, Table 13
Stratospheric prices (>10%): Argentina, Ivory Coast, Dominican Republic
High prices (>5%): Ecuador, Venezuela, Uruguay, Brazil, Nigeria
![Page 54: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/54.jpg)
Patrick Bond ([email protected]) 54
Emerging market debt rates of return
Source: International Monetary Fund Global Financial Stability Report 2004, p.22
![Page 55: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/55.jpg)
Patrick Bond ([email protected]) 55
China factor:Vast FDI and equity issuance
Source: International Monetary Fund Global Financial Stability Report 2004, p.129
US$ billions
9/11 FALLOUT
![Page 56: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/56.jpg)
Patrick Bond ([email protected]) 56
Danger sign:Net capital flight worsens
Source: International Monetary Fund Global Financial Stability Report 2004, p.124
US$ billions
![Page 57: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/57.jpg)
Patrick Bond ([email protected]) 57
Net capital flightfrom Asia
Source: International Monetary Fund Global Financial Stability Report 2004, p.124
US$ billions
![Page 58: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/58.jpg)
Patrick Bond ([email protected]) 58
Net capital flightfrom Africa
Source: International Monetary Fund Global Financial Stability Report 2004, p.126
US$ billions
![Page 59: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/59.jpg)
Patrick Bond ([email protected]) 59
Net capital flightfrom Middle East
Source: International Monetary Fund Global Financial Stability Report 2004, p.126
US$ billions
![Page 60: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/60.jpg)
Patrick Bond ([email protected]) 60
Exposure of international banks to emerging markets
Source: International Monetary Fund Global Financial Stability Report 2004, p.33
Extreme foreign gearing:
Venezuela, Singapore,
Czech Republic, Croatia,
Paraguay, Mexico, Hong Kong, Slovac
Republic, Romania,
Poland
![Page 61: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/61.jpg)
Patrick Bond ([email protected]) 61
Emerging markets’ $ reservesMost (relatively) wealthy: Malaysia, Czech Republic, Thailand,
China, Korea
Source: International Monetary Fund Global Financial Stability Report 2004, p.143
![Page 62: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/62.jpg)
Patrick Bond ([email protected]) 62
Strength of Asian, US and other major banking systems
Source: International Monetary Fund Global Financial Stability Report 2004, Table 28
Terribly risky: Indonesia, Pakistan, China, Japan, Thailand, Philippines, Korea
![Page 63: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/63.jpg)
Patrick Bond ([email protected]) 63
Strength of Latin American and E.European banking systems
Source: International Monetary Fund Global Financial Stability Report 2004, Table 28
Terribly risky: Argentina, Uruguay, Bolivia, Venezuela, Ukraine, Turkey
![Page 64: Patrick Bond (pbond@sn.apc.org)1 US reversion to high interest rate regime during 1980s-90s Source: Gerard Duminil and Dominique Levy VOLCKER INTEREST.](https://reader035.fdocuments.net/reader035/viewer/2022062407/56649e405503460f94b31629/html5/thumbnails/64.jpg)
Patrick Bond ([email protected]) 64
Long-term record of sovereign bankruptcy:
Percentage of countries in default, 1820-1999
During debt crises of the 1830s, 1880s and 1930s, response was default; During crises of 1980s-90s, response was ‘restructuring’ (IMF/WB bailouts plus structural adjustment) Key variable: centralised creditor power.Source: World Bank (2000), Global Finance Tables 2000, Appendix G, Washington.