Carry Trade

Credit expansion



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Quantum Finance -
the science of making money appear out of nowhere

Quantum Finance: The Science of Making Money Appear Out of Nowhere
Posted by Adrian Ash on Dec 27th, 2006

Quantum Finance - the science of making money appear out of nowhere - is too complex for all but the very brightest young guns to grasp. Yet it underpins the entire financial universe today.

Fitch Ratings say there’s also trouble ahead in emerging markets. “With the carry trade fuelled by ample global liquidity and record financial market flows to emerging markets,” it said this week, “big shifts in interest rate expectations and a further weakening of the US dollar would test those emerging markets with fragile policy credibility and large external and fiscal financing needs.”

Selling a bond backed by mortgage debt means the banks can lend that much money again, doubling their assets per Dollar of deposits. In Britain alone, this little scheme helped the major banks lend nearly $1 trillion more than they took in from savers between 2002 and 2005.

Full text

The Liquidity Pyramid of the New Monetarism, The Daily Reckoning on Dec 28th, 2006

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