The IMF’s Lagarde had this to say, “The bottom line is that risks to global financial stability are rising. The ‘new mediocre’ growth environment is not a comfortable place with respect to financial stability.”
Among those risks, she said, was a “structural decline in market liquidity” caused primarily by changes in the asset management industry in advanced economies that had created a mismatch in the maturity of assets and liabilities.
“This means that liquidity can evaporate quickly if everyone rushes for the exit at the same time — which could, for example, make for a bumpy ride when the Federal Reserve begins to raise short-term rates,” she said.
In this man’s opinion the Federal Reserve is being warned not to raise interest rates in order to keep some sort of credibility that they are quickly losing. On the flip side, if the Fed does raise interest rates, then it becomes a warning to us all to prepare for hard times ahead.