Tiff Macklem Warns of Global Capital Imbalances and Stability Risks

While cross-border finance serves a vital economic function, Macklem argued that excessive, one-way capital flows inevitably lead to misallocation. Current massive investments in artificial intelligence infrastructure mirror past patterns that preceded market bubbles. When adjustment mechanisms—such as shifting exchange rates—are delayed, growth stagnates and structural risks accumulate across the global economy.

Adding to this volatility is the shift in how capital is intermediated. As banking regulations have tightened, funding has migrated toward non-bank entities, including hedge funds, private equity, and pension funds. These players operate outside the stringent reporting and monitoring requirements applied to traditional banks, creating a blind spot in the global oversight framework. Macklem suggested that countries must resist the rising tide of protectionism and diversify their investment horizons beyond U.S. markets to mitigate these mounting pressures.