In recent weeks, the economic recovery has been compromised in such a way that we speak of stagnation on the way to a recession. Added to this fact are atypical levels of inflation with severe monetary adjustments where interest rates would be reaching 9.5% in Mexico and 6% in the US. These elements oppose the need for governments, companies and individuals to obtain large amounts of money to ensure, as far as possible, economic viability in a context full of uncertainty, recession and with a high cost of money. In case of not being able to obtain money to ensure cash flows, there will be many bankrupt companies and families and with governments in crisis. We all know what happens when there is little or no growth, inflation and high interest rates; A negative shock invariably occurs in the banking system, transferring the risk to the rest of the links in the financial system, such as stock market operations, insurance and many others. Being realistic, we must call things as they are, so the conditions are given to enter a scenario of this nature. Everything will depend on how long high inflation lasts and growth resumes. The US economy is heading towards recession, China is not growing and Mexico is already in stagflation, surviving on remittances and foreign trade.
We will then witness a scenario that will require a perfect calibration between interest rates and growth, in an environment of excessive need for money. Being able to allocate abundant amounts of resources depends on sources of financing with prudential mechanisms of the first order. The financial resources will have to be placed quickly, however, they cannot be delivered under the regulatory and supervisory parameters that gave rise to the 2008 financial crisis with subprime mortgages, a tragic episode characterized by lax or non-existent prudential regulations. Unfortunately, we are not in a position to determine whether that irresponsible attitude in determining the interest rate and then in granting credit has already disappeared, and we will know even less in a recessive environment with inflation, until the impact on the sector financial is evident. The latent risks remain coupled with the search to accelerate growth in a recovery environment that is notoriously uneven among the countries. The ingredients are given to configure possible bank failures, market volatility or the emergence of systemic risks. We do not know if the global and national financial systems are prepared to face these potential risks. In our country, the Secretary of the Treasury in charge of Rogelio Ramírez de la O and the CNBV of Jesús de la Fuente Rodríguez must be on alert with constant monitoring, since with only the balance of the public on the fiscal side and a half-hearted operation of the financial sector will not be enough to prevent these already latent risks.
Doctor of Economic Development and Law and Philosophy
AUCTORITAS
Professor at the Universidad Panamericana, Ibero and TEC. He has worked at the Bank of Mexico, the Ministry of Finance, the Presidency of the Republic and in Washington, DC. He is the author of books on economic history, financial regulation, monetary policy, economics, and ethics.