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IMF fears the world’s financial system is even more destructive than in 2008
By Ambrose Evans-Pritchard
The Telegraph, London
Wednesday, October 16, 2019
The International Monetary Fund has presented us with a Gothic horror show. The world’s financial system is more stretched, unstable, and dangerous than it was on the eve of the Lehman crisis.
Quantitative easing, zero interest rates, and financial repression across the board have pushed investors — and in the case of pension funds or life insurers, actually forced them — into taking on ever more risk. We have created a monster.
There are “amplification” feedback loops and chain reactions all over the place. Banks may be safer — though not in Europe or China — but excesses have migrated to a new nexus of shadow lenders. Woe betide us if this tangle of hidden leverage is soon put to the test.
That broadly is the message of the International Monetary Fund’s Global Financial Stability Report, always a thriller but this time almost biblical. “Policymakers urgently need to take action to tackle financial vulnerabilities,” said the fund’s directors piously. It is a bit late for that, my friends.
Even a moderate shock would cause company “debt-at-risk” — that is, where the debtors do not earn enough to cover interest payments — to spiral up to $19 trillion. This is a staggering 40 percent of corporate liabilities.
The tally includes a future cascade of “fallen angels” now perched at BBB ratings just above junk. Such firms will be squeezed mercilessly by tumbling earnings and soaring risk spreads in a downturn.
Yep, so much that is probably surpassed the imagination of the framers when they drew up the constitution. China who is exempt from climate change has them doing their bidding. Just dangle a few beads in front of them and they’ll come running. And they do it with our money as the drop off their copied or out sourced products to our shelves.
You think with the amount of work needed on that ship yard they’re would be hundreds of jobs for Americans. The last time I was there if I didn’t know I was in Long Beach you’d think you were in a port in South America.
It surely couldn’t be archaic out-of-date precious metal financial instruments causing any stress in the banking sector which is allegedly built on a stoic, conservative, moral, society supportive foundation!
Sure we all can. After a solid 8 years of continuing nightmare a little bit of dreaming would do us some good. 🙂
Something appears to be wrong in bank/derivative/repo land but the Fed has gotten so good at manipulating and papering over problems, none of the markets (except gold) skip a beat.
Aliens runs this world! It’s the aliens I tell ya!!
Yep eliminate a form of communication they can’t control. Even in a power out lol I guess those Tesla’s will need their own generators. Oh wait don’t generators need gas?
Re Repo’s…so now everyone in the Repo mkt has to stay schtumm and pray the Rig can hold it all together…..something ain’t right, but it is being very well hidden, as the boys at ZH are almost certainly ex bond traders, so they know the Repo mkt inside out and if they haven’t worked out what is wrong, then as I say it is being very well protected….so it sure must stink.
Here’s a article from last year that points the story in the right direction.
It’s also true the power outs in Calif there was no wind unless in some areas 10 miles hr was wind. It took a while for some Californians in those areas to get it but when they did generators were sold out real fast followed by bags of ice. One they start this no doubt it will keep up. No one including medical patients at home were protected. Some kids missed a week of school. People including restaurants lost food hurting small businesses. https://www.google.com/amp/s/www.latimes.com/business/la-fi-long-beach-terminal-20180420-story.html%3f_amp=true
[This is a whisper that only the adroit are capable of hearing/understanding, just wait till the shouting starts.
Wait till the MSM has its hair on fire].
Something Snaps: Repo Freezes Again As Overnight Fed Operation Oversubscribed, Repo Rate Jumps
First it was supposed to be just a mid-month tax payment issue coupled with an accelerated cash rebuild by the US Treasury. Then, it was supposed to be just quarter-end pressure. Then, once the Fed rolled out QE4 while keeping both its overnight and term repo operations, the mid-September repo rate fireworks which sent the overnight G/C repo rate as high as 10% was supposed to go away for good as Powell admitted the level of reserves was too low and the Fed launched a $60BN/month Bill POMO to boost the Fed’s balance sheet.
Bottom line: the ongoing repo market pressure – which indicated that one or more banks were severely liquidity constrained – was supposed to be a non-event.
Alas, as of this morning when the Fed’s latest repo operation was once again oversubscribed, it appears that the repo turmoil is not only not going away, but is in fact (to paraphrase Joe Biden) getting worse, because even with both term and overnight repos in play and with the market now expecting the Fed to start injecting copious liquidity tomorrow with the first Bill POMO, banks are still cash starved.
The negative rates in EU and JP are a consequence of everyone trying to get out of US treasuries: yielding < 2%, fed deficit > 3%, current account -2%! They are not insane, but entirely rational. The neg rate distortion only is taking place bec there is so much less depth of EU bonds vs UST, nowhere to go
Well the Fed created this mess. And why are they only buying short term treasury bills and notes instead of longer dated ones. Shouldn’t also the Fed be buying banks stocks? It’s basically a daisy chain at the leper colony and they’re running out of lepers. Most of this so called wealth is an illusion. IOU’s backed by nothing used as collateral to rehypothecate more money. And on and on it goes. In the end have physical gold,silver and cash although the cash is an IOU it will keep you ahead of the bunch
I find it pretentious when they characterize the economic system as having ‘plumbing’. The deal is, the banks are running a high risk casino where they reap profits and any loss is dumped on the tax payer in the form of HIGHER PRICES. Get ready plebs, gonna be 2008/2009 all over again.
Posted by Captain Hook
@ 11:00 on October 16, 2019
The Chinese think they own Cali so they got their bought and paid for traitors in power disabling the state prior to an actual physical invasion down the road.
Posted by Captain Hook
@ 10:28 on October 16, 2019
Yes true but the idiot hedge funds are still long gold and silver (less) futures out the kazoo by historical standards so further consolidation is definitely possible.
If da boyz put out some more good news soon I could see a stab at $1450 minimum. And if the funds don’t lighten up on their positions lower on a rinse/repeat routine.
Unfortunately, the not so rosy eco numbers, QE4 or the failing Repo market aren’t quite enough to overcome the Crimex and their paper gold and silver market.
“It was developed for a very specific threat and it does incredible things…we intend to operate it differently — in support of an Army on the move. It’s not just going to be static.”
AUSA: The Army doesn’t want to buy any more Iron Dome air defense systems, but if it may have to buy more of the Israeli-made system if it can’t get its own program up and running by 2023.
The purchase of the Israeli system this summer was meant to fill a gap the Army has in defeating shorter-range missiles, but Congress imposed a 2023 deadline in the 2019 National Defense Authorization Act for the American service to develop its own system or it would have to buy more Iron Domes.
The purchase was made, “because we had nothing else out there,” Brig. Gen. Brian Gibson, Air and Missile Defense Cross Functional Team director told reporters today. “We needed some immediate capability above the tactical level.”
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