Rolf Englund IntCom internetional
The US central bank is planning to shed trillions in assets, but markets are calm
I believe that low rates have distorted the financial system so deeply that they are now doing more harm than good, creating perverse effects;
This argument will not disappear until either the central banks decisively raise rates or the debt bubble implodes.
BIS. Starting in 2003, officials at the Basel-based institution, started to warn that the world economy was plagued by excessive levels of debt.
Why have markets reached their exposed position?
Claudio Borio, the BIS's chief economist,
How can anyone make sense of today’s markets?
Echoes of 2008 as danger signs are ignored
Systems flooded with cash can sometimes freeze.
A “sizeable” number of them, he observed, probably presumed that they could exit their positions before any sell-off.
After a life of trend spotting, Bill Gross missed the big shift
In recent years an astonishing amount of money has quietly flooded into fixed income funds,
Why the dollar stays steady as America declines
Eight ways conventional financial wisdom has changed post crisis
Are the markets going mad?
Dad, you were right
Back then, in 1996, I was working as a (relatively new) economics correspondent for the Financial Times, covering the preparations for the euro. And as I analysed the technicalities of that euro-tale, I was becoming consumed with a sense of historical drama – and excitement about the project.
My father, however, took a radically different view: as he listened to me describe how the euro would transform Europe, he repeatedly and grumpily shook his head. “It won’t work,” he muttered, pointing out the problem of running monetary policy without fiscal union. “It just doesn’t make sense.”
I vehemently disagreed. So much so, that as the red wine flowed and the fondue bubbled, we had an explosive, blazing row which lasted even as we later tramped out into the snow, and has gone into family lore.
Gillian Tett, av alla människor, gör en pudel.
Gillian Tett är en briljant kollega som efter en avhandling i socialantropologi – om Tadzjikistan – specialiserat sig på hur finansmarknaderna opererar.
Tett, som förvarnade om finanskrisen, kom för två år sedan ut med en genomträngande analys (Fool’s Gold) av hur giriga och kreativa ungdomar hos JP Morgan utvecklade instrument för billiga krediter till amerikanska egnahem (”sub-prime”)
Rolf Gustavsson, SvD 10 juki 2011
Gillian Tett is an assistant editor of the Financial Times and
oversees the global coverage of the financial markets.
She is also one of Rolf Englund´s Gurus.
Click here for more gurus
If the Financial Times' Gillian Tett were hit by a bus, I'd be in a lot of trouble.
With all due respect to her colleagues, she is the best source of financial news.
naked capitalism blog, August 13, 2007
Click here for more of her articles
Similarly, my colleague Gillian Tett made headway because she asked simple but probing questions:
Where had all these derivatives come from?
As the policy debate intensifies, investors might spare a thought for Korekiyo Takahashi,
Watch out for tail risks hanging over the $14,300bn US Treasuries market
"a loss of confidence – not merely in the idea that the future will be a brighter place, but also, most crucially, about whether anybody is able to predict that future at all."
And just to make matters worse, the memory of the May 6 “flash crash” haunts the markets. In the past three months, US regulators and bankers have scurried around trying to work out what caused equity prices to gyrate so wildly that day. But, thus far, they have not offered any convincing explanation
Back in 2008 the US government effectively nationalised Fannie and Freddie
One fascinating idea now provoking a chorus of behind-the-scenes debate among regulators and central banks
When central banks start implementing exit strategies,
The $6,000bn dollar question for the wider financial system.
While the prices of mortgage-linked bonds have already slumped to reflect house price falls, the value of many tangible loans have not been fully marked down, because they are lodged in hold-to-maturity books – and the banks do not believe that prices will continue to fall. Indeed, in the town that I visited in West Virginia, some local bankers are refusing to sell foreclosed properties, because they think prices will soon rise. Thus, if prices fall instead, it can only mean one thing: yet more bank pain.
So will US property prices stabilise? Not if you believe a startling presentation I saw this week from a large, global financial group. This particular bunch of analysts – who have done a remarkably good job at predicting the credit crisis during the past four years – are currently warning their clients to expect a peak-to-trough fall in US residential prices of more than 40 per cent in this cycle.
The bad news is that houses are not yet cheap enough to prevent more price falls. On the contrary, this particular team of analysts thinks that when the problems of excess house inventory and rising unemployment are added into the model, average US house prices will still fall by another 14 per cent in the next few years – on top of the declines seen so far.
If it turns out to be correct, it raises two crucial questions.
One is the degree to which the western banking system could face a secondary round of real estate losses (particularly as these analysts are even more alarmed about the commercial property outlook than the residential sector.)
The second fascinating question is what further house prices falls might do to consumer psychology. America has never experienced negative equity on this scale before. Thus nobody is entirely sure how households might respond. Will they default en masse? Will voters become so angry that they demand more populist public bail-outs of the housing sector (or financial reform)? Will consumers cut spending further?
The former Fed chairman urged central banks to avoid suppressing asset bubbles, which is "exceptionally difficult" to do.
"The critical issue on the whole subprime, and by extension, the international financial system
rests very narrowly on getting rid of probably 200,000-300,000 excess units in inventory," /-houses/
The collapse of Lehman Brothers has shown the havoc that can ensue when large, interconnected banks implode.
Until this week, most policymakers were reluctant to attack the big banks too publicly, in terms of size. After all, this has been the decade when global leaders – or the infamous “Davos man” – worshipped at the altar of free-market capitalism, globalisation and innovation.
Philipp Hildebrand, the next head of the Swiss National Bank, revealed that the central bank was considering introducing “direct and indirect measures to limit the size” of large international banks (which in the case of Switzerland means Credit Suisse and UBS).
Why the yen borrowing game could end in players taking a tumble