Updated: Aug 15, 2019
The latest round in the US-China conflict was only the catalyst for the emergence of these issues. Under conditions where the world economy is clearly on a recessionary trend—the euro zone is slowing and the UK economy contracted in the second quarter—the deeper question now coming to the surface is how long central banks can continue to pump money into the financial system without setting off a systemic crisis?
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The current turmoil in financial markets was set off by the Trump administration’s threat to impose tariffs on an additional $300 billion worth of Chinese goods and its decision to label China a “currency manipulator,” following Beijing’s move to allow the renminbi to fall. The extreme volatility has prompted questions about the stability of the global financial system.<