Bank of Canada governor Tiff Macklem warns of rising global imbalances that could threaten financial stability

Tiff Macklem, the Bank of Canada’s governor, stood before a crowd at Paris Europlace on June 23 and delivered the kind of speech that makes central banking watchers sit up straighter. Global imbalances in trade and capital flows are widening, he warned, and if that sounds familiar, it should.

The last time these imbalances reached uncomfortable levels, the world got the 2008 financial crisis. Macklem drew the comparison explicitly: the post-crisis narrowing of global trade deficits and surpluses has reversed, and we’re heading back toward the kind of lopsided international flows that tend to end badly.

The problem with money moving in the shadows

Financial activity has been migrating away from traditional banks, which are heavily regulated and stress-tested, into non-bank entities. Think hedge funds, pension funds, and other intermediaries that operate in what regulators politely call “less regulated channels.”

Macklem flagged these complex and opaque capital flows as a significant amplifier of financial risk. When you combine widening trade imbalances with capital flows that regulators can’t fully see or understand, you get the kind of fragility that looks manageable right up until it isn’t.

Canada’s awkward position as a bystander

Macklem was careful to note that Canada isn’t one of the countries driving these imbalances. It’s not running a massive trade deficit like the US or a massive surplus like China. But being a relatively small, trade-dependent economy sitting next to the world’s largest means Canada absorbs the shockwaves regardless.

Macklem’s prescription for fixing the underlying problem was straightforward, even if the execution would be anything but. The United States needs to save more. China needs its consumers to spend more. Europe needs to invest more.

What this means for investors and crypto markets

For traditional market participants, Macklem’s warning translates to a fairly direct message: volatility risk is rising. When global imbalances widen and capital flows become harder to track, the potential for sudden corrections in equity and bond markets increases.

The specific areas to watch are the ones Macklem identified. US savings trends, or more accurately, the lack thereof. Chinese consumption data, which will signal whether Beijing’s periodic stimulus efforts are actually reaching households. And European investment flows, particularly whether the continent can mobilize capital toward productivity-enhancing projects rather than just sovereign debt.

For crypto markets, Macklem didn’t mention digital assets at all. But the underlying dynamics he described, growing distrust in the stability of established systems, opaque financial intermediaries, and currency-related risks, are precisely the conditions that historically drive capital toward decentralized alternatives.

The migration of financial activity toward less regulated, less transparent channels also raises an interesting parallel. Crypto critics often point to the sector’s lack of regulatory oversight as a risk factor. But when a G7 central bank governor is warning that the traditional financial system’s own shadow banking sector is creating systemic fragility, the “but crypto is unregulated” argument loses some of its rhetorical force.

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