NEW YORK – An increasingly obvious paradox has emerged in global financial markets this year. Though geopolitical risks – the Russia-Ukraine conflict, the rise of the Islamic State and growing turmoil across the Middle East, China’s territorial disputes with its neighbors, and now mass protests in Hong Kong and the risk of a crackdown – have multiplied, markets have remained buoyant, if not downright bubbly.
Indeed,
oil prices have been falling, not rising. Global stock markets have,
overall, reached new highs. And credit markets show low spreads, while
long-term bond yields have fallen in most advanced economies.
Yes,
financial markets in troubled countries – for example, Russia’s
currency, equity, and bond markets – have been negatively affected. But
the more generalized contagion to global financial markets that
geopolitical tensions typically engender has failed to materialize.
Why
the indifference? Are investors too complacent, or is their apparent
lack of concern rational, given that the actual economic and financial
impact of current geopolitical risks – at least so far – has been
modest?
Read more at http://www.project-syndicate.org/commentary/nouriel-roubini-asks-why-global-financial-markets-remain-buoyant-in-the-face-of-mounting-geopolitical-risks#RVr6ObMC3TzyAlJ0.99
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
