A Bull Market in Financial Crises

by: John Lounsbury

Reza Moghadam has an interesting article at iMFdirect entitled "Global Safety Nets: Crisis Prevention in an Age of Uncertainty". In the article he has the following graph (click to enlarge) which I could not resist adding a "resistance" trend line defining the ever increasing heights of the FSI (Financial Stress Index) peaks. Such a rising resistance line is reminiscent of equity bull markets. How about a bull market in crises?

Moghadam discusses the recent actions by the IMF (International Monetary Fund) to try to stabilize financial systems by improving the IMF provided safety nets for countries with "sound policies and economic fundamentals".

Presumably the IMF has been trying to make improvements in their processes over the entire time of the "crises bull market". It is not reasonable to expect that the IMF actions could have any discernible impact on the stability of the broader global financial system, but it is of concern that the emerging market crisis curves (red) in the graph appear to be following a somewhat parallel "bull market" path to that of the rest of the world.

When will the structural assumptions that appear to be cultivating a "bull market in disasters" be examined?

Hat tip to Barry Ritholtz at The Big Picture.

Disclosure: No stocks mentioned.