Former CEO sees more bank turmoil economist from IMF, Rajuram Rajan, who points out that too much easy money and high liquidity over a long period of time creates perverse incentives and perverse structures. These structures, he explains, become brittle when things turn over. Rajuram Rajan, a former chief economist at the International Monetary Fund who predicted the 2008 global financial crisis more than a decade ago, warned that the banking system would face a new round of turmoil after the collapse of Silicon Valley Bank and its bailout. Credit Suisse. Something similar is estimated by a large number of economists and analysts who foresee that they will be followed by bankruptcies of other regional banks. They hope, however, that it won’t be literally dominoes.

Rajan, who also served as India’s central bank governor, argued that a decade of easy money and a flood of liquidity from central banks had created “addiction” and made the financial system more fragile. The problem is becoming clear now that central banks in charge of monetary policy are abandoning the highly expansionary policy of zero or even negative interest rates that they have been pursuing for many years and are making the most aggressive turn towards a restrictive policy with consistent interest rates in decades. rate. raising rates. Among them are the US Federal Reserve, the Bank of England and the ECB, which, especially after the decision of OPEC to cut production sharply, are faced with the prospect of a new acceleration of inflation. In this case, they will face intractable dilemmas, as they will have to raise interest rates even more, while the risk of a recession is already looming.

“I hope for the best, but I expect there could be more, in part because some of what we saw was unexpected,” Rajan told Bloomberg in an interview in Glasgow. “The whole problem is that too much easy money and high liquidity over a long period of time creates perverse incentives and perverse structures that become brittle when things change.” Hours earlier, IMF chief Kristalina Georgieva stressed that the global economy was entering a period of sluggish growth, largely due to geopolitical tensions and subsequent fragmentation. As Ms. Georgieva noted, in the medium term, the world economy will show the lowest growth rates over the past 30 years or more. Speaking in Washington before the spring meeting of the IMF and the World Bank, Ms. Georgieva predicted that the world economy would grow at an average of 3% per year over the next five years. This is a lower percentage than previously predicted and is the most pessimistic forecast since 1990, at least in terms of medium-term growth.

In the three decades since the early 1990s, globalization has led to higher growth rates and helped lift millions out of poverty. However, with the ever-increasing trend towards protectionism and with major emerging economies such as China currently in better shape, global growth is expected to be subdued.