INSUBCONTINENT EXCLUSIVE:
The world economy faces risks ranging from surging non-financial corporate debt to US fights with creditors and the potential for a new
global dividing line.
Those concerns dominated the second day of the Bloomberg New Economy Forum in Singapore on Wednesday, where former
Federal Reserve Chair Janet Yellen warned the US might struggle to cope with lending risks that have spread beyond banks.
In the starkest
warning of the day, former Treasury Secretary Hank Paulson said an “economic iron curtain” could emerge as the US and China throw up
trade walls.
“Washington now strikes many people as attempting to disrupt all aspects of China’s external economic relationships,”
Paulson said at the opening of the event, which is being organised by Bloomberg Media Group, a division of Bloomberg, the parent company of
“This risks setting Washington up for a new round of battles with its allies and partners - the very partners it needs to help alter
Chinese behaviour.”
Earlier, Yellen warned the US might not be able to manage risks from migrating debt
“We are more attentive to the emergence of risks outside the banking sector, but it’s unclear that we actually, at least in the United
States, have appropriate tools to deal with these,” she said
The authority of US banking regulators to deal with risky debt is limited, she added.
Yellen was joined on a panel by Ravi Menon, managing
director of the Monetary Authority of Singapore
He noted that loose liquidity and expansionary policy in developed economies had led to a build-up of debt in emerging markets
In ramping up their dollar borrowing, such economies become exposed to a strengthening greenback and rising interest rates.
