No sooner had the International Monetary Fund warned of ghastly events which could topple the complacency of global policymakers and all hell lets loose on financial markets.
Stock market volatility has become normalised as a result of computer-driven trading and can be dismissed as of little importance if economic conditions are benign.
But a 3.15 per cent fall in the Dow Jones on Wednesday followed by big falls in Asia, Europe and the UK must raise fears that the equity bubble is bursting.
The IMF’s managing director Christine Lagarde refused to talk about share price fluctuations but acknowledged that equity prices are too high.
The IMF’s managing director Christine Lagarde refused to talk about share price fluctuations yesterday but acknowledged that equity prices are too high
Certainly, there is enough disturbance in the global economy for people to be scared.
Just to add to the agitation in Bali, a fatal overnight earthquake about 100 miles away was enough to cause some financiers to leave beds and head for higher floors.
The market turmoil can be traced back to Washington. Donald Trump’s appointee as chairman of the Federal Reserve, Jay Powell, frightened the horses by lifting the key interest rate to 2.25 per cent, indicating a further rate rise this year and three more in 2019. The ten-year US bond rate has been driven up to 3.18 per cent.
Bonds have become a hedge against volatile shares and US money invested overseas is coming home.
Caught in the vortex of all this, Trump turned his fire on the Fed saying it is ‘going loco’. Normally such sensitive issues are dealt with behind closed doors.
It is not helpful that Italy’s fallout with Brussels over budgetary problems has led to a nasty spike in Italian bond yields, taking them to 3.7 per cent, reviving memories of the euro crisis in 2010.
The difficulty for the European Central Bank is that the eurozone economies and banks are not robust enough to be flexible on interest rates.
The biggest uncertainty driving markets is the clash of wills between the US and China over trade.
It looks as if China is getting the worst of this with the authorities having to ease reserve requirements to prevent a credit crunch.
Lagarde and the IMF appear to be tilting towards Beijing in seeking a solution, suggesting that some of the issues raised by the US, including state subsidies and tech transfers, have some merit.
What is certain is that the prospect of worsening trade relations accompanied by currency wars, as the Chinese seek to export their way out of trouble, is not great.
Ten years after the financial crisis and the tectonic plates are shifting again. And the outcome is potentially very nasty.
The big idea from World Bank president Jim Yong Kim in Bali is to drive development by investing in human capital.
This may sound a bit old hat. But the approach is very different with the Bank seeking to drive change through the use of a league table, the Human Capital index, which focuses on outcomes.
Into the statistical mixer go four relatively simple, but easily quantified ingredients.
The components are survival in the shape of under-five mortality, expected years of learning, the health of children under the age of five, and the adult survival rate. As with any league table the natural instinct is to cast an eye down the list to see where your country lies.
Singapore gets the gold star as number one and Britain comes in at number 15, behind Germany and ahead of France.
The real value is getting countries such as Indonesia, hosts of the IMF and World Bank in Bali but number 87 on the list, to move up the index.
The hope is that the competitive instinct will see the countries lower down, including much of sub-Saharan Africa, improve their labour stock.
Britain already has expressed interest in using the index methods to pinpoint differences between regions and neighbourhoods. It looks to be a really useful tool.
So far the IMF’s managing director Christine Lagarde, her normally conservative deputy David Lipton, World Bank president Jim Kim, as well as underlings, have embraced elaborately decorated batik shirts, or a derivative.
Veteran festival goer, the Bank of England governor Mark Carney, is a hold-out – the only Western grand figure on a global panel on fintech to wear a suit.
What chances of Chancellor Philip Hammond getting with it?