Australian veteran journalist Anthony Rowley, who regularly writes for South China Morning Post on economic matters from a Eurasia vs. West and developed vs. developing countries standpoint, wrote a Dec. 31 “Macroscope” column headlined “‘Silent Killer’ Liquidity Crisis Will Stalk Global Financial System in 2023.” (https://www.scmp.com/comment/opinion/article/3204796/silent-killer-liquidity-crisis-will-stalk-global-financial-system-2023 )
Rowley centers his commentary on recent warnings issued by both the IMF and, more sharply, the Bank for International Settlements (BIS) in its Triennial Central Bank Survey, of the existence of serious and gradually worsening shortages of dollar liquidity under the rapid swing in central banks’ policy in 2021-22. This liquidity shortage in fact began to emerge rather seriously during 2019 and was the underlying reason for the central banks’ sudden outpouring of newly printed money supply beginning in October 2019.
But Rowley’s warning is correct; the liquidity shortage is international, is getting worse, and clearly is unpredictable in the context of the Federal Reserve’s and European Central Bank’s blundering switches between lowering and raising interest rates.
It should be kept in mind, though, that the gathering storm clouds of a liquidity crisis are a phenomenon of the dollar reserve monetary system with its weaponized currencies and massive derivatives overhangs, concentrated in volatile exchange-rate and interest-rate derivatives. Above all, with its lack of productivity growth throughout its “advanced” economies. It can be averted by a new international economic and financial architecture, rather than by anything proposed by the BIS or IMF.
