Financial Markets: Increasing Complexity, Maintaining Stability

3–5 July 2019, ST. PETERSBURG

    One of the key problems for the global economy today is currency wars. This was what Stephen King, Global Chief Economist of the UK financial corporation HSBC, stated on Thursday, June 30, at the International Financial Congress in St. Petersburg, according to a correspondent.

    This was his answer to a question from Bank of Russia Governor Elvira Nabiullina, asking him to list the main global risks. “I have a very long list of things that concern me,” Mr. King said.

    First, the US economy is unable to revive itself for seven years now and there is a risk that it is drawing closer to another recession. Whereas there are no salvation measures left: the US Federal Reserve System base rate remains crucially low, the expert stressed.

    Second, the low inflation in the UK, combined with a payment balance deficit, creates another problem. Brexit might exacerbate the situation, since the shortage was usually covered by direct investments.These might drop because of the UK’s withdrawal from the EU, Mr. King added.

    The third problem, according to the economist, consists in currency wars.“If one country devalues its currency and the rest don’t, that’s good,” the expert said. The problem arises when many countries weaken their national currencies, he stressed. The difficulties in China derive precisely from devaluation, Mr. King believes. Ashe noted, many countries, thanks to a reduction in the exchange rate of their own currencies, “exported their problems to the PRC.As a result, the Chinese economy has slowed down and everyone has suffered,” the HSBC Global Chief Economist concluded.

    On June8, Minister of Finance Anton Siluanov stated that the rouble no longer depends directly on oil prices. He added that “a lot could affect” the Russian currency now, particularly US Federal Reserve System decisions.