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BIS chief fears fresh Lehman from worldwide debt surge Jaime Caruana says investors are ignoring prospect of higher interest rates in the hunt for returns Ambrose Evans-Pritchard 13 July The world economy is just as vulnerable to a financial crisis as it was inwith the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned. Jaime Caruana, head of the Swiss-based financial watchdog, said investors were ignoring the risk of monetary tightening in their voracious hunt for yield. The analytical underpinnings of the current phase of risk taking in financial markets are far from robust. Less pleasant scenario — that of stagflation and greater financial instability. If she had any sense, she would have acted in advance to prevent an asset bubble or at least stall the one Bernanke had started. The Fed is not going to attempt a controlled collapse. Yet, a collapse is coming. It will be anything but controlled. I will address the absurdity of that notion momentary, but first please consider some snips from the BIS report that caught my attention.

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