A cautionary tale of global financial market volatility

Recently, the market of commercial mortgage-backed securities (CMBS) in Europe and the United States has exploded, and this major event has set off a storm in the international financial field. The impact of the CMBS market explosion has gone far beyond the scope of Europe and the United States, triggering a series of chain reactions in global financial markets. Behind this phenomenon, there are many deep-seated problems, which have aroused great concern and deep thinking from all walks of life.

First, financial oversight is undoubtedly a key factor. In the evolution of financial markets in Europe and the United States, the regulation of emerging financial products such as CMBS has failed to keep pace with the pace of market innovation. Regulators have obvious shortcomings in important links such as risk assessment, information disclosure and market norms, resulting in excessive market liberalization and rampant speculation. This loose regulatory environment provides a hotbed for the quiet accumulation of financial risks, and eventually detonates the market crisis.

Second, excessive financial innovation plays a role as a risk booster to some extent. In order to pursue higher profits, financial institutions constantly innovate and design extremely complex financial derivatives. However, the true risks of these products are often underestimated or even cleverly hidden. In the European and American CMBS market, the complex structure design and obscure trading mechanism make investors in the risk assessment like a fog, difficult to accurately grasp. At the slightest disturbance in the markets, panic spread like wildfire, greatly exacerbating the severity of the crisis.

Moreover, the improper macroeconomic policy is also one of the important incentives leading to the explosion of CMBS market. For a long time, the low interest rates and loose monetary policies pursued by European and American countries did stimulate economic growth in the short term, but at the same time, it also gave rise to the expansion of asset price bubbles and the accumulation of debt. When the economic situation turned and monetary policy had to be adjusted, the fragile nature of financial markets became evident, and the CMBS market was the first to suffer heavily.

In addition, in the context of deepening globalization, international financial markets are increasingly interconnected. As the core components of the global financial system, Europe and the United States, any severe turbulence in their financial markets will inevitably be quickly transmitted to other countries and regions in the world. This phenomenon fully exposes the fragility and instability of the global financial system in responding to local risks.

From the macro perspective of the global economy, the CMBS market explosion in Europe and the United States has undoubtedly sounded a wake-up call for us. It is a profound reminder that in the pursuit of financial innovation and high-speed economic growth, we must not ignore the importance of financial stability and risk prevention. Countries around the world should strengthen exchanges and cooperation in the field of financial regulation, and work together to build a more sound, efficient and forward-looking regulatory system to jointly withstand the impact of global financial risks. At the same time, when formulating macroeconomic policies, countries must pay attention to the coordination and sustainability of policies, and resolutely avoid the adverse consequences of excessive stimulus and market chaos caused by sudden policy changes.