Nomi Prins: Big Banks Already Failing Stress Tests by Craig Wilson
Nomi Prins joined Jason Burack on the Wall Street For Main StreetPodcast to discuss the impact of a strong US Dollar on the global economy and what kind of damage it could cause big banks that are already failing stress tests. Wall Street For Main Street takes on themes of finance, investing and the economy and offer a natural setting for important, independent discussions from economic insiders offered from Nomi Prins and others. The conversation delves into what to expect in the political and economic year ahead for 2017.
When asked what type of damage could a strong U.S dollar do to the global economy she noted, “First, the fact that the U.S dollar is as strong given how long the Federal Reserve has completed quantitative easing (QE) policies and bought securities is very troubling in general because it indicates that the rest of the world is far weaker on a relative basis.”
“It also indicates that is it not necessarily a policy that drives dollars stronger. What’s occurring is, outside of the U.S for example, in emerging market countries, they have had funding that has been denominated in dollars over the years.”
Nomi Prins a former managing director on Wall Street. Prins’ is currently working on her latest book, The Artisans of Money which is set to be out later in 2017. Before stepping out of the world of Wall Street, she worked at Goldman Sachs and Bear Stearns, among other banking giants.
“Increases in funding from 2014 and 2015 because of the expectations that rates would rise in the U.S and money would be more expensive to come by in terms of lending opportunities. These have leveraged themselves in debt that will have to be paid in U.S dollars. We saw this in the 90’s with major debt crises, in particular within emerging markets like Latin America. That was based more on government debt that was owed to the United States and U.S private banks.”
“Now what we have is a situation where a lot of the debt is corporate in nature which makes it a different type of debt. That is still a debt denominated in dollars, and the more expensive it because the more difficult it is to repay. What we are seeing is an increase in global corporate defaults. We have had as many corporate defaults in 2016, which were 40% increase over 2015, as we have had in any year since the global financial crisis. That trend is upward. That is going to feed into the general financial fabric of the world and markets outside of the U.S.”