Andrew G Haldane: Risk off Paper by Mr Andrew G Haldane, Executive Director, Financial Stability, of the Bank of England, 18 August 2011. *  *  *  The views are not necessarily those of the Bank of England or the Financial Policy Committee. I would like to thank Aashish Pattani, Ben Broadbent, Srishti Chhabra, David Gregory, Priya Kothari, James McBride, Lewis Webber and Nicola Worrow for comments and contributions. Four years on from the start of the Great Recession, the world economy is cloaked in uncertainty. The story so far is well understood. Over-extension of private sector balance sheets – in particular among banks – sowed the seeds of the crisis. Those private sector risks have since been socialised, either directly through support for the financial sector or indirectly through lower aggregate output in the economy at large. That socialisation has caused balance sheet risk to migrate from the private to the public sectors. Today, these public sector balance sheets strains are most visible in Europe where a number of countries remain under the sovereign searchlight. But outside Europe, two of the world’s three largest economies – the United States and Japan – have been the subject of ratings action. And sovereign CDS spreads among advanced countries are at their highest-ever levels. Four years on from the start of the Great Depression, the world economy was also cloaked in uncertainty.
In view of such initiatives, with a worldwide and immediate scope, you will agree with me that international coordination is not an option but an obligation. 3/3