Low interest rate discourage saving, bond yields and cause investor to seek higher yields in speculative commodities and forex market.
Hence, energy and food price exploded to levels of threatening social and economy.
-41% of total international reserve (end of 2007)
America can maintain a large trade deficit only if foreign banks continue to hold a large number of dollars in their reserve currency. US entire consumption economy is based on the willingness of foreigners to hold US debt. A new world order is required .
1. monitoring macro-financial linkages associated with developments and emerging trends in the external sector, domestic economy and financial markets, corporate and household, contagion implication to financial system.
2. monitoring and evaluating the development of sector specific issues within the financial sector and the potential implications for overall system wide stability.
Mounting inflation and financial disorder would inflict costly stagflation , contraction in trade and disorderly oil and food markets.
Ultimately, global financial security is not about stability and wealth generation for their own sakes but creating a system of transactions that enhances the livelihoods of people and natural environment, both for now and future.