G7 running out of ammunition, says analyst

THE Group of Seven nations’ pledges of liquidity injections and exchange-rate co-operation may be ill-suited to addressing the concern at the heart of the past week’s stock market rout: another global recession.

Currency markets lack the systemic misalignment of the sort seen with the dollar strength in 1985 that distorted global demand, according to Atsushi Ito, a rate strategist in Tokyo at UBS.

With fiscal policies across developed nations restrained by attempts to shore up sovereign ratings, and US companies and households boosting their savings, the challenge this time may be lack of a source of demand to sustain global growth.