1. Global Debt Risk: Are We Ready For The Next Crisis
Global Debt Risk: Are We Ready For The Next Crisis? Presentation by William White
“ 10 Years After the Crisis - Modelling Meets Policy Making”
OECD-NAEC and the Fields Institute
Fields Institute
Toronto, Canada
15-16 January 2019

2. Three kinds of policy action required
Crisis prevention measures - inadequate to date
Crisis management measures – increasingly hard to implement
Crisis resolution measures – ever more necessary but ineffective
Further debt buildup might lead to very bad outcomes
Media:Project Syndicate, Dec. 2017

3. Crisis prevention: the role of monetary policy
The dangerous delusion of near-term “price stability”
Monetary policy since 2008 essentially “more of the same”
Has lacked effectiveness in stimulating aggregate demand
But has contributed to a massive increase in global debt
As well as more financial instability
And lower potential growth
Media: Project Syndicate, December 2017

4. Crisis prevention: the role of financial regulation
Some positive developments
But still problems with microprudential regulation
And also macroprudential regulation
The “boundary problem” and “whack a mole”
Financial stability is not yet assured
Presentation: The 2008 Global Financial Crisis in Retrospect
Presentation: What is Macroprudential Policy Not?

5. Crisis prevention: policies at cross purposes
Monetary and regulatory: accelerator and brake
Monetary and fiscal: accelerator and brake
A false faith in monetary policy
By those who desperately wish to believe
Publications: William White Comments on a Paper by Malcolm Knight

6. A serious downturn seems inevitable
Moderate slowdown will reveal debt problems
Economic pickup will trigger the debt trap
Financial overshoots also possible
Trump policies exacerbate existing risks
A worse downturn than 2008?
Media: Project Syndicate September 18, 2018

7. Crisis management will be difficult
Domestic constraints on monetary easing
Domestic constraints on fiscal easing
Domestic constraints on liquidity support
Political constraints on international coordination
And potentially even on Fed “swaps”
Media: FAZ December, 2018
Media: A Global Dollar Shortage? September, 2018

8. The case for crisis resolution
Kicking the “debt can” down the road was problematic from the start
And has become increasingly difficult
Orderly debt restructuring is better than Debt-Deflation
And has political advantages as well
Media: Financial Times April 18, 2018

9. Impediments to restructuring in the private sector
No one wants to hear “the money is gone”
Particularly if there is a moral dimension
Inadequate restructuring procedures for non financial sector
Other impediments to dealing with bad loans in the financial sector
“Too big to fail” and “too big to save” remain big issues

10. Impediments to public sector restructuring
No one wants to say “the money is gone”
The bank/sovereign nexus problem
No agreed criteria for the need to restructure
No international treaties to force action
The myth of central bank debt forgiveness of sovereign debt

11. Policy reactions to deepening disorder
The attraction of post War “financial repression”
But can it work in the modern world?
The attraction of “helicopter money”
But could it end in high or even hyper-inflation?
Media: FAZ December, 2018

12. A concluding comment
We are at a dangerous juncture
Orderly debt restructuring beats the alternatives
If Plan A (hoping for the best) is not a viable strategy
We should be preparing Plan B