We have new warnings coming from the BIS this month to add our list of IMF/BIS warnings page. This time we have two articles. One in the UK Telegraph quotes BIS Chief Economist Claudio Borio as follows regarding the recent global market volatility: " We are not seeing isolated tremors, but the release of pressure that has gradually accumulated over the years along major fault lines."
Then Bloomberg publishes an article that looks at the latest BIS Quarterly report and suggests the dovish central bank policies are "producing unintended consequences for assets such as German bonds, European inflation-protected securities, currencies, and Swiss mortgage rates."
Below are quotes from the two articles:
---------------------------------------------------------------------------------------------------------UK Telegraph - BIS Fears Emerging Market Maelstrom as Fed Tightens
"Debt ratios have reached extreme levels across all major regions of the global economy, leaving the financial system acutely vulnerable to monetary tightening by the US Federal Reserve, the world's top financial watchdog has warned.
The Bank for International Settlements said the wild market ructions of recent weeks and capital outflows from China are warning signs that the massive build-up in credit is coming back to haunt, compounded by worries that policymakers may be struggling to control events.
"We are not seeing isolated tremors, but the release of pressure that has gradually accumulated over the years along major fault lines," said Claudio Borio, the bank's chief economist.
The Swiss-based BIS said total debt ratios are now significantly higher than they were at the peak of the last credit cycle in 2007, just before the onset of global financial crisis." . . . . .
"Mr Borio warns investors not to push their luck. "It is unrealistic and dangerous to expect that monetary policy can cure all the global economy’s ills," he said.
Nor is there any easy way out of the debt-trap now encompassing much of the globe. "If I were you, I would not start from here," he said."
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"Central-bank policies are producing unintended consequences for assets such as German bonds, European inflation-protected securities, currencies and Swiss mortgage rates, according to the Bank for International Settlements (BIS).
The European Central Bank’s purchases of government bonds to stave off deflation risk have probably added to a drop in liquidity, consequently increasing price swings of German government bonds, the region’s benchmark security, the institution said in a report released Sunday. It noted that banks’ scaling down on their inventory holdings of fixed-income assets is part of the long-term trend of a decline in liquidity."
. . . . .
"“Reduced market liquidity and central-bank actions may have played a role,” the institution said. Some observers suggested the ECB’s bond purchases, which started in March, “may have further reduced the supply of tradable German bonds, which had already been fairly strained due to low issuance volumes.”
The ECB’s QE program, which included index-linked bonds, also distorted an inflation-expectation signal traditionally extracted from the market, according to the BIS, which was formed in 1930 and acts as a central bank for the world’s monetary authorities."
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My added comments:
With the internet flooded right now with predictions of the start of a major market crash from a variety of sources, these new warnings will likely just add more fuel to the fire for those who are forecasting a major market event in the next two months.
With the internet flooded right now with predictions of the start of a major market crash from a variety of sources, these new warnings will likely just add more fuel to the fire for those who are forecasting a major market event in the next two months.
In her latest audio interview, Nomi Prins joins in with those forecasting a major crisis worse than 2008. She suggests however, that we are not yet at the point for the crisis to begin in her interview. She and Jim Rickards rarely try to provide any kind of hard date for the next crisis to occur. Instead they just emphasize the conditions for one are ripe and we could have one at any time going forward in the next 2-3 years.
Tomorrow, we will find out if the US Fed will ignore pleas from both the IMF and The World Bank not to raise interest rates now. They are joined by a number of prominent economists (like Joseph Stiglitz) and even a former aide to Janet Yellen. Jim Rickards has also said he thinks the Fed will not raise rates tomorrow.
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