The BIS Annual Report: From Goldilocks to the Three Bears

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Pri­or to the NASDAQ crash in ear­ly 2000, Amer­i­can com­men­ta­tors were fond of describ­ing their econ­o­my as being in a “Goldilocks” phase–with all eco­nom­ic indi­ca­tors being “just right”.

That phrase dropped out of cir­cu­la­tion after April 2000, but a lev­el of com­pla­cen­cy still ruled when that stock mar­ket crash appeared to have lit­tle impact on the real econ­o­my.

Com­pla­cen­cy dra­mat­i­cal­ly left the build­ing today, with the release of the Bank of Inter­na­tion­al Set­tle­men­t’s (BIS) 77th Annu­al Report. The BIS turns the Goldilocks sto­ry around, and sees it not from Goldilocks’ per­spec­tive, but from that of the Bears. Just as the Bears’ domes­tic idyll was dis­turbed by Goldilocks the Home Invad­er, the appar­ent­ly neat glob­al finan­cial sys­tem has been put at risk by out of con­trol spec­u­la­tive lend­ing.