WEF warns UK most exposed to crunch fallout

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January 9, 2008

WEF warns UK most exposed to crunch fallout

The World Economic Forum says threats to global prospects from financial and political risk are the worst for a decade

Gary Duncan, Economics Editor

Britain’s reliance on the financial sector as an engine for the economy has left it more exposed than most other leading economies to fallout from money market turmoil and the global credit squeeze, the World Economic Forum said today.

Challenges to global prospects this year from a slate of economic and political risks are the most severe the world has faced in a decade, with dangers from global financial upheavals the most immediate and acute threat, the Forum finds.

In a bleak analysis that raises fears over the serious risk that the credit squeeze could trigger a US recession, the WEF’s annual Global Risks report also emphasises that Britain may also bear the brunt of the growing repercussions.

“In Europe, the prominence of the UK’s financial sector makes it vulnerable,” it notes.

The wave of turmoil that has engulfed world credit markets since the US sub-prime home loans crisis began last summer has raised “fundamental questions over the vulnerabilities of the current model of financial markets”, the report’s authors conclude.

Although rapid market innovation, deregulation and increasingly complex financial instruments have may have made the system more resilient under normal conditions, the forum argues that not enough attention has been paid to the impact of serious stresses.

“Many would argue that the overall resilience of the global financial system will only become evident under conditions of severe stress over the next year,” it said. “The complexity and near-infinite feedback loops of the modern financial system have exposed it to a small risk of very large systemic shocks …

“Hence, we may be facing a paradox: while the financial system has been made more efficient and stable in normal times, it is also now more prone to excessive instability in really bad times.”

The authors urge a radical and swift re-examination of the global financial system’s operation by both policymakers and private sector institutions to seek ways to limit present and future dangers.

“New thinking may be urgently required,” they argue, calling for “increased public and private sector collaboration on stress testing, liquidity management, risk assessment and prevention”.

Full story, Source: The Times

[Bill Hill]

January 9, 2008

WEF warns UK most exposed to crunch fallout

I'm sorry, but what would a bunch of 'wrestlers' know about the financial markets or economics?

Besides, they're not even real wrestlers; everyone knows they're faking it.