BIS warns global economy risks crisis ‘relapse’

© AFP/File | BIS chief economist said central banks around the world had been administering “powerful medicine” to counter the effects of the 2008 crisis, with “unusually and persistently low interest rates,” which came with some “inevitable” side effects

 

ZURICH (AFP) – The Bank of International Settlements said Sunday the global economy risked a “relapse” of the crisis that rocked it a decade ago, warning there was little “medicine” left to treat the patient a second time.

“Things look rather fragile,” BIS chief economist Claudio Borio told reporters in a conference call.

“There is little left in the medicine chest to nurse the patient back to health or care for him in case of a relapse,” he warned. Continue reading

China jitters could trigger global market bloodbath, IMF warns

Jitters over the health of the Chinese economy could trigger a bloodbath on financial markets if a hard landing materialises, the International Monetary Fund has warned.

The IMF said policy choices in the world’s second largest economy would also have “increasing implications for global financial stability” in the coming years as the country opens up its bond and equity markets.

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Eurozone Economy ‘Losing Steam’ Amid Market Turmoil

LONDON—The economic recovery in the 19-country eurozone lost steam in January, a closely watched survey found Wednesday, a sign that the turmoil in global financial markets is beginning to weigh on business activity.

Financial information company Markit said its purchasing managers’ index — a broad gauge of activity across both the manufacturing and services sectors — fell to a four-month low of 53.6 points in January from 54.3 the previous month.

According to Markit, that means the region has started off the year growing at a modest 0.4 percent quarterly tick. Rates of growth also diverged, with Spain once again leading the pack, followed by Germany. France appears to be stagnating.

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The China Syndrome: The Coming Global Financial Meltdown

The 1979 film The China Syndrome took its name from the darkly humorous notion that a nuclear reactor meltdown in the U.S. would burn straight through the Earth to China. (wikipedia: The China Syndrome)

In today’s world, the financial meltdown in China has burned straight through the global financial system to the U.S. financial markets. The mainstream financial media is delighted to promote the many links between the U.S. and Chinese economies when the two economies are feeding each other’s expansion in a tightly coupled virtuous cycle. Continue reading

Chinese yuan likely to be added to IMF special basket of currencies

China hopes stamp of approval will improve yuan’s desirability among investors and undermine hegemony of US dollar as global reserve currency

China’s efforts to make the yuan an international currency on a par with the US dollar is to receive a fillip with the International Monetary Fund widely expected to add it to a special basket of global currencies.

Analysts say the shareholders in the Washington-based IMF will vote on Monday to include the yuan, also known as the renminbi, as the fifth member of its special drawing rights currency basket alongside the dollar, the Japanese yen, sterling and the euro.

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Glencore Collapse Could Be Even Worse Than Feared

Editor’s Note: We’re sharing this update on Glencore’s collapse with you because it’s shaping up to be even worse than Michael originally thought. Glencore still poses a “Lehman Brothers”-level risk to the global economy – but it’s now clear the world’s biggest commodities trader is on the hook for hundreds of billions in “shadow debt” that it simply refuses to address. This crisis is one small step away from upending our financial system, so here’s what you need to know…

A lot of powerful voices have joined me in warning about the potential threat that Glencore Plc. (LON: GLEN) poses to global financial markets. Bank of America, for instance, has published a report on the true size of the fallout. As you’ll see in a moment, it’s staggering.

But since we talked about Glencore late last month, something insane has happened: The stock has gone up.

But not for any good reason. The company has not righted the ship. The surge is only due to short-sellers covering their positions. Continue reading

Can the renminbi beat the dollar for currency supremacy?

China’s planned launch of an international payment system to process cross-border yuan transactions in September will challenge the US dollar’s dominance in global trade and help Beijing build a leading role in Asian and global financial markets.

The greenback’s dominance in global trade and financial markets has begun to weaken because of the currency’s co-dependence with US military power, which is seeing structural changes.

American military power also ensures security at home and creates a safe environment that attracts foreign investment in US assets and bonds and a desire to hold the US dollar, which is accepted in most parts of the world. Continue reading

An Interview with Felix Zulauf – Financial Markets Are More Distorted than Ever

Risks and Opportunities

Investors started off 2015 with a slow global economy, low oil prices, a strong Dollar, and a deflationary Europe with great uncertainties on the progress of the US economy and the recent launch of Europe’s quantitative easing. The question is, what opportunities lie ahead? This article highlights the main topics covered in an interview between Mr. Frank Suess, CEO and Chairman of BFI Capital Group, with the globally renowned Swiss fund manager, Mr. Felix Zulauf. Mr. Zulauf currently heads Zulauf Asset Management, a Switzerland-based hedge fund and has forty years of experience with global financial markets and asset management. He has been a member of the Barron’s Roundtable for over twenty years. Continue reading

The EU’s Day of Reckoning: Italy Is Too Big to Bail Out

In the end the central theme of most articles reporting on EU events, is that all roads end up leading back to Berlin, the powerhouse of Europe.

And who knows, perhaps Mario Draghi’s upcoming resignation and a possible wish to be the next Italian president is a sign that he wants to go back and save Italy from the wrath that Greece has suffered: Complete capitulation to Germany in exchange to economically stay afloat and keep from descending into social chaos as a result.

Lest we forget what the European Union founders had in mind for the world’s next superpower (See also HERE and HERE), the United States of Europe led by modern day Assyria’s Fourth Reich.

 

Italy is one of the world’s leading tourist destinations. The ruins of the Roman Empire, in particular, the Coliseum, Palatine Hill, the Pantheon and the Forum, are major attractions. New ruins are now being created to mark the political decay at work at the heart of Italy’s democracy and economic policymaking. These new ruins could well include the country’s central bank and parliament as well as the Eurozone as the stage is set for Europe’s next big economic debt crisis.

At the center of the brewing storm is the issue of confidence. When investors trust sovereign debtors, governments have access to credit markets. When investors lose confidence in a country’s ability to pay, they head for the door. The cost of borrowing goes up and at some point it hits a level where it becomes unaffordable to raise money.

Such a loss of confidence afflicted Cyprus, Ireland, Greece and Portugal between 2010 and 2012, shutting them out of public borrowing, creating the European debt crisis and forcing them to seek financial assistance from the European Union, European Central Bank and International Monetary Fund. Italy barely avoided that embarrassment. Continue reading

BIS warns on ‘violent’ reversal of global markets

The global financial markets are dangerously stretched and may unwind with shock force as liquidity dries up, the Bank of International Settlements has warned.

Guy Debelle, head of the BIS’s market committee, said investors have become far too complacent, wrongly believing that central banks can protect them, many staking bets that are bound to “blow up” as the first sign of stress.

In a speech in Sydney, Mr Debelle said: “The sell-off, particularly in fixed income, could be relatively violent when it comes. There are a number of investors buying assets on the presumption of a level of liquidity which is not there. This is not evident when positions are being put on, but will become readily apparent when investors attempt to exit their positions.

“The exits tend to get jammed unexpectedly and rapidly.”

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Market report: Citi warns of geopolitical tremors

Investors’ “indifference” to the threats “is unlikely to last”, the US bank has warned

On what was the worst day for the FTSE 100 since March, Citigroup sounded an ominous warning for investors.

Geopolitical risks, including the rise of jihadist extremists in the Middle East and simmering tensions between Russia and the West, are “proliferating”, said analysts at the US bank, while investors’ “indifference” to the threats “is unlikely to last”.

Citi’s timing was apt. Geopolitical factors helped to drive the 97.55-point fall to 6,676.08 suffered by London’s benchmark index, with brokers citing the air strikes in Syria by the US and its allies as a reason for the sell-off, as well as the downing of a Syrian fighter jet by Israel.

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“Federal Reserve and Other Central Banks Own Close to Half of All Stock Markets”

These links reveal that the US Federal Reserve Board and other central banks around the world own “close to half of all [the] stock markets.” The title of this post is the title of the first link. Please re-read the first sentence and let it sink in to grasp the meaning of this shocking revelation. I think most citizen-investors around the world assumed that all stocks were owned by private investors, sovereign investment funds, pension funds, mutual funds, etc. Not true! The first three links reveal that vast amounts of stock equities are owned by the US Federal Reserve Board and other central banks! The Fed and the central banks have surely been buying these stock funds with fantasy money, money created by the central banks “out of thin air.” If a private investor tried to do that, it would be called “counterfeiting.” Continue reading

The potential role of the Asian Infrastructure Investment Bank

China’s president, Xi Jinping, announced the creation of an Asian Infrastructure Investment Bank (AIIB) just before the October 2013 APEC meeting in Bali. If the new bank is managed professionally to finance commercially viable investments in economic infrastructure, it can begin to correct a very significant failure of global financial markets.

There is room for a new development bank, specialised in financing large-scale economic infrastructure on commercial terms, working alongside existing multilateral development banks, including the World Bank and the ADB. These well-established institutions have the expertise to lend a lot more for infrastructure, but have moved in a different direction. Net lending by multilateral development banks on commercial terms has been negative in five of the last ten years, including 2011 and 2012. The World Bank and the ADB are now focusing on concessional lending and knowledge sharing with low-income countries, leaving an important niche to be filled by a new financial institution. Continue reading

First a default, then a depression? Some think so

It wouldn’t only cause a depression or another Great Depression, but the Greatest Depression.

Thursday brought a change to that trend, though, as investors heeded a dire message from President Barack Obama, who intimated in a CNBC interview Wednesday that Wall Street was taking the crisis too lightly.

Consequently, stocks sold off sharply and the Treasury Department warned of the dire consequences that might result from a full-blown debt default.

Picking up on that message, Bove said the situation could be more dramatic: A Depression that would cause severe and lasting economic damage.

“The devastation to the United States would be so severe that it would take decades to recover from the Depression caused by a default and the attendant dumping of trillions of dollars of U.S. Treasury securities on the global financial markets,” said Bove, vice president of equity research at Rafferty Capital Markets. Continue reading