Gerd Hausler monitors potential crises around the world, and last month his department published a somewhat dour report on global financial stability.
The capital markets department warned that high levels of corporate and consumer debt could slow a global recovery, that stock markets might be overoptimistic about a rapid recovery in corporate profit growth and that the credit cycle lags the business cycle by roughly two quarters, implying that the pace of defaults won,t moderate until the third quarter. The IMF report was based on early February data, however, while the Fed’s fresh optimism reflects the more favorable numbers that subsequently emerged.
Hausler acknowledges the latest information but stands by his findings. “We may sound alarmist,” he says. “To be a watchdog, you appreciate the good news, but you have to point to what may be also not the good news. I,m just warning about exuberance, if you like.” Now there’s a term Fed chief Alan Greenspan ought to recognize.
