Asia faces asset bubble risks from global stimulus, says Fosler
Monday, 14 September 2009
SINGAPORE, Sept. 13 (Bloomberg): Asia faces greater risks from asset bubbles caused by global stimulus than from threats to economic growth, said Gail Fosler, president of the Conference Board.
Governments need to be vigilant of the money flowing into their economies as investors buy assets such as real estate in emerging markets, Fosler of the New York-based research group said in a speech in Singapore today.
"There is a tremendous amount of fiscal stimulus that is going into producing the supply response that you see in the global economy today and the growth in assets continues to be stunning," Fosler said. "This sets the stage for asset bubbles to move out of the US and into Asia and emerging markets in general. It will be extremely important to be watchful in terms of asset accumulation and price accumulation."
The global economy is emerging from the worst recession since the 1930s, as governments increase debt levels to finance spending. Officials from the Group of 20 nations this month expressed caution on the world economic outlook and judged it premature to start unwinding record-low interest rates and about $2 trillion in fiscal stimulus.
The global equity rally has added about $17 trillion to the value of stocks since this year's low on March 9 as the credit crunch eased and investors became more confident of a recovery.
"There is almost no deleveraging that is actually taking place and the only thing that has slowed down is the rate of growth in leverage," Fosler said.
Governments need to be vigilant of the money flowing into their economies as investors buy assets such as real estate in emerging markets, Fosler of the New York-based research group said in a speech in Singapore today.
"There is a tremendous amount of fiscal stimulus that is going into producing the supply response that you see in the global economy today and the growth in assets continues to be stunning," Fosler said. "This sets the stage for asset bubbles to move out of the US and into Asia and emerging markets in general. It will be extremely important to be watchful in terms of asset accumulation and price accumulation."
The global economy is emerging from the worst recession since the 1930s, as governments increase debt levels to finance spending. Officials from the Group of 20 nations this month expressed caution on the world economic outlook and judged it premature to start unwinding record-low interest rates and about $2 trillion in fiscal stimulus.
The global equity rally has added about $17 trillion to the value of stocks since this year's low on March 9 as the credit crunch eased and investors became more confident of a recovery.
"There is almost no deleveraging that is actually taking place and the only thing that has slowed down is the rate of growth in leverage," Fosler said.