The IMF gets to the heart of the matter when it comes to today’s international financial imbalances:
WASHINGTON (MarketWatch) – Global financial markets might not be prepared for potential shocks like worse-than-expected inflation data, particularly if the era of low interest rates is coming to a close, an IMF report said Tuesday.
“There is little cushion for bad news regarding asset valuations if expectations for continued favorable fundamentals change,” the IMF said in its Global Financial Stability report.
That is my fear. And in fact, that is exactly the main lesson I drew from my exercise in constructing hard and soft landing scenarios last week: the soft landing scenario is possible, but it’s easier to imagine ways in which something could go wrong and turn it into a hard landing than it is to imagine ways in which something could turn a hard landing into a soft landing.