The world’s economic and political leadership convenes in Davos, Switzerland this week amid fears of a new round of defaults which could outstrip anything witnessed during the 2008 economic crash. Speaking in the Daily Telegraph yesterday, William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements (BIS), warned “”The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up,”
Mr. White, one of the world’s leading monetary theorists, also added ” Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,” Speaking exclusively to the Telegraph, Mr. White noted that even those players who have previously felt insulated from economic downturns may be in for a shock, observing “”It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something,” The Eurozone is a particularly fragile area, where, according to veteran Euro-watcher Ambrose Evans-Pritchard:
“Europe’s creditors are likely to face some of the biggest haircuts. European banks have already admitted to $1 trillion of non-performing loans: they are heavily exposed to emerging markets and are almost certainly rolling over further bad debts that have never been disclosed.”
William White’s remarks will come as a stark warning to those gathered at Davos this week, for it was he who repeatedly warned of the West’s financial vulnerability during the period 2005-2008. Ostensibly a symposium on workplace automation, terrorism, migration and inequality, the 2016 round of talks among global finance’s great and good comes at a time when technological advances further threaten white-collar jobs. As The Guardian noted yesterday, some seven million jobs are at risk in the world’s largest economies as a result of increased automation.
Other issues dominating the Davos agenda include the migrant crisis, economic instability in the European Union and global terrorism. Building on the consensus reached in last month’s Paris climate talks, global leaders are expected to devote considerable time to the issue of climate change, reckoned to be the largest single threat to the world’s economy, according to the World Economic Forum’s (WEF) annual risk survey.