Chinese wealth management Products (WMPs) are a form of asset backed shadow banking deposit, paying above the rates of regulated banks. The WMPs have been soaring to become the second biggest segment of the financial system. The incur large maturity mismatches and hence are subject to serious liquidity risks.
The basics of financial repression
A subtle type of sovereign debt restructuring is “financial repression.” Financial repression denotes a compound of measures to channel cheap funding to governments, accompanied by a steady dose of inflation. It was practised in the developed world during Bretton Woods era.
A review of euro area rescue funds
The European Financial Stability Facility (EFSF) and its permanent replacement, the European Stabilization Mechanism (ESM) haven proved less effective than the ECB in quelling crisis dynamics. However, the funds are large in size and will play major role in the euro area’s institutional response to crisis pressue.
