BIS Annual Economic Report 2019 (BIS, Report)
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The BIS has a bearish tone in in their annual report. They argue that monetary policy cannot be the engine of higher sustainable growth. Central banks’ role is now exhausted, and monetary stimulus alone adds little economic value; worse, it could do harm. Tax systems need to be reformed because they currently favour debt over equities. Bank profits are low in some advanced economies with price-to-book ratio hovering around 0.5x for the Euro Area. This suggest that many banks have yet to manage a full repair of their balance sheets. Corporate debt markets are overheating. High yield, low rated debt is on the rise with the leveraged loan market reaching $3tn. China is aiming to deleverage the corporate sector in a transition to service-based economy but it’s hurting SMEs and local government and is depressing investment and economic activity.
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