The Spaniard Jaime Caruana is the Chief of the secretive Bank for International Settlements (BIS). The BIS fears that central banks are no longer able to avoid the crash in the global debt crisis. Ben Bernanke has supplied the evidence on Wednesday. (Photo: Reuters)
- The Bank for International Settlements (BIS) is the current situation on the financial markets as worse than before the Lehman bankruptcy. The warning of the BIS could be the reason why the U.S. Federal Reserve decided to continue indefinitely to print money: Central banks have lost control of the debt-tide and give up.
German Economic News
19 September 2013
Translated from German
The decision by the U.S. Federal Reserve to continue indefinitely to print money (here) could be found on "orders from above" have fallen.
Apparently, the central banks dawns that it is tight.
Very narrow.
The most powerful bank in the world , the Bank for International Settlements (BIS ) has published a few days ago in its quarterly report for the possible end of the flood of money directly addressed - and at the same time described the situation on the debt markets as extremely critical. The "extraordinary measures by central banks" - aka the unrestrained printing - would have on the markets of the illusionaroused that the massive liquidity pumped into the market could solve the fundamental problems (more on the huge rise in debt - here ).
This clear words may have meant that Ben Bernanke and the Federal Open Market Committee, the Fed cold feet got. Instead, as expected, which is now formally announcing the end of the flood of money, the Fed has decided to just carry on as before.
If one is to the BIS experts believe that no single problem is solved.
All problems are only increasing.
Because the BIS itself but apparently does not know how the genie back into the bottle gets, it pays to listen to those who were part of the system - but now have no official functions and therefore more able to find clear words.
The former chief economist of the Bank for International Settlements (BIS), William White, was also reported to be parallel to the BIS word.
His statements are nothing more and nothing less than an announcement of the big crash.
White warned in unusually clear form of a huge, global credit bubble .
The share of "leveraged loans" or the extreme form of credit risk by mid-2013 at an all time high of 45 percent . This is ten percentage points higher than at the height of the financial crisis in 2007. A year later, in September 2008 were LehmanBrothers bankrupt.
Thus, the current situation is more dangerous than before the Lehman bankruptcy.
"All previous imbalances are still there. Total public and private debt is 30 percentage points, as measured by the gross national product of developed countries. And we have a whole new problem with bubbles in emerging markets, in a boom-bust cyclewill end, "William White writes in the UK Telegraph .
Cause is the global hunt for high-risk financial products . The collective behavior remember the phenomenon of "exuberance" that led to the global financial crisis.
Is key, says White warns that no one knows how to climb the global borrowing costs, whether the U.S. central bank tightened its monetary policy, or "howdisorganized the process may be, and the challenges to be prepared. "
This means: It is an illusion to believe that the market under stress would remain solvent. The BIS is concerned for some time about the runaway development, only a few months ago had BIS chief Jaime Caruana warned of a serious crisis ( here ).
Remarkably, criticized the BIS, which is also often described as a bank for central banks, which clearly inadequate actions of the central banks. In particular, the BIS took the Governor of the Bank of England, Mark Carney and his colleagues, ECB chief Mario Draghi before.
Trying to certain "guidelines" ("forward guidance") to define, to maintain long-term government bond yields low, either alone rhetoric that essentially failed. " There are limits to how far the good communication can control markets. These limits are too obvious, "said Claudio Borio, responsible for research and development at the BIS.The guidelines consist of the ECB's announcement, unlimited to buy government bonds (OMT). The Fed and the Bank of England had their gekopppelt measures the number of unemployed.
In the annual report 2012/2013, the BIS held the debt sustainability of the industrial countries as desolate and insisted on a rapid debt reduction.
To what consequences it leads, if the developed countries do not get the debt under control, is the example of the United States clear: Assuming the Rendit level of U.S. government debt grows over the entire term of three percent, so should investors in these bonds a loss of over one trillion U.S. dollars accepted.
In Italy, France, Great Britain and Japan about the losses between 15 and 35 percent of gross domestic product in this case would constitute, the BIS warned in August of this year.
Another consequence is that central banks and banks were large stocks of U.S. government bonds to the most injured. They would therefore insolvent .
Previously, it was useful to take predictions seriously the BIS. The BIS had pointed out six years ago at the onset of the global financial crisis and the associated dangers.
Late last year warned Kaushik Basu, chief economist at the World Bank: "A debt wall coming towards us. "
He was referring to the banks made available by the ECB about one trillion euro LTRO (longer-term refinancing operations). The ECB aims was for a "transmission belt of monetary policy" produce which could benefit in particular small and medium-sized enterprises in Southern Europe and thus the euro crisis stop.
These are loans for banks with a three-year term, each of the end of 2014 and early 2015 due for redemption. Whether this is guaranteed, to what extent the loans from the banks were used and how and whether they will be paid back to the ECB, is completely transparent.
The chief economist of the World Bank, Kaushik Basu, said in this connection the fact that 2014 and 2015 with a "in the years another big shock would expect "for the world economy.
BIS and World Bank are the main global instances that determine the economic development of the world (more on this spooky braid - here ). Both banks to supervise jointly with the IMF, the theoretical task of the central banks.
Actually consists staff but in the central banks of a combination of economic researchers and investment bankers , including Goldman Sachs and Draghi, Carney coming from Goldman. Bernanke worked for Harvard, Stanford and Princeton.
Researchers and investment bankers generally have little idea of the real economy . Some are committed to the theory, the other the tangible interests of the elite world of investment banking. You have never worked even one day like normal people, the investor Marc Faber said.
With the unchecked flood of money coming poisonous cocktail of scientific theory and method-party for the speculators now at its lees.
The Tages-Anzeiger in Zurich believes that Bernanke and his colleagues "prevented a global depression" by printing money would.
But:
"It's not them but managed to make a sustained recovery of the real economy to accomplish. In addition, the unconventional monetary policy has its price. The flood of money associated endanger the people's confidence in the currency. Although there is no evidence that inflation rises, so does the fear of inflation.The political pressure on central banks to close the floodgates again is, therefore, become very large. "
The problem is that central banks have before closing the locks seem more afraid of before the supposedly safe "business as usual".
The FT recently came to a radical conclusion: "The central banks have given up hope that they can bring the world financial system back in order. "From the annual meeting of the Fed in Kansas, the newspaper took concludes with:" The world is a endless cycle of bubbles, financial crises and currency collapses damn t. "Central banks have no tools to balance the global imbalances.
Hélène Rey of the London Business School in a working paper describes the consequences for Jackson Hole as "hopeless": The central banks could no longer control how the world economy developed. In a flood of money unleashed by the global credit system, the Fed had no more to control capital flows . Even with flexible exchange rates, the countries of the world lose the opportunity to be masters of their own destiny. The only solutions, not expected from the Rey that the world would accept it, would be the imposition of global capital controls or total control of the U.S. Federal Reserve over the global economy.
It would be illegal if the Fed would leave its policy to the developments in other states.
However, all other solutions are unlikely: There is massive resistance to the voluntary return to the gold standard . The introduction of strict capital controls, strict regulation of banks and a waiver of the policy in all over the world into debt , as suggested by Rey will not take place in practice. The failure of the financial traction control ( here ) and the ban on short-selling ( here ) show that the development is out of control.
The BIS knows that the markets and prepares for the worst.
The recent decision by the Fed to print more money is therefore nothing else than the command "batten down the hatches" , and thus the return to the primacy of national interests of America.
What will trigger this decision world, Americans can no longer influence.
From now on, the following are solutions : Everyone is each own neighbor! Save yourself if you can! Women, children and bankers first! More fuel to the fire!
We now have an admission of central banks to the debt tsunami can not stop.
Just try one more thing: to reach a state where they can still say: 'After us the deluge "
But just this race is tight, very tight.
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