QOTD -- #GlobalMacro

A picture is worth a thousand words. Consider the graphic that appears on page 29 of the European Systemic Risk Board (ESRB) report below. Analysts and strategists seeking insight into policy trajectories need only this one picture to illustrate the significant structural shifts in global economic activity.

Significant post-crisis decreases in transatlantic financial flows and the parallel increase in US/Asia financial flows suggest strongly that shared policy interests are dwindling between the US and Europe regarding trade, financial regulation (particularly macroprudential regulation, which is a focus of the report), FinTech innovation, and monetary policy (which is also a focus of the report).

Parallel trends showing the growing role of non-bank financial institutions hold particularly powerful implications for the conduct of monetary policy, particularly as central banks increase their experimentation with central bank digital currencies.


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