An uneasy calm – the calm before the storm?
From the Bank of International Settlements (BIS) quarterly report.
The “uneasy calm” in global financial markets followed quite a choppy and confused period for global banking and financial flows. Global financial flows showed disparate patterns across regions and currencies, dancing to the tune of past and anticipated central bank actions. (1)
Yes there is an uneasy calm in the markets – very calm when compared to the months prior to September 15th – the Fed Meeting – interest rate rises deferred.
So what has changed?
Acceptance – by all and sundry that it is nigh impossible to maintain zero interest rate policy?
If that is the case – then I for one would be happy – that the World Central Bankers are quite happy to take their medicine – quit happy that they are to be detached from the bloated Fed Bank teat – that has fed them surplus cash at near zero interest rates for near on ten years.
What has this near zero rate policy actually produced?
The majority of World Governments have increased the debt loans from the Financial Crisis of 2008 – in fact their balance sheets show that they have repaid all long term high interest rate loans and borrowed far more on low rate – short term funds.
Then take the consumers – nothing like a Government padding the GDP with consumer spending – in some cases off credit cards – with zero interest rates for 36 months – then the refinance of existing loans – just double down on the borrowing and extend the term because they can afford the low rates.
The Governments in general have increased expenditure alarmingly – the majority of the Commodity Producing and Manufacturing countries even entered into a currency war – devaluing their assets in a vain attempt to boost exports and increase income.
All Governments continued to borrow – yet which governments entered a period of fiscal conservatism and attempted to repay their debts from austerity imposed on their constituents?
Blinded by political power and the unending near zero supply of dollars – the unending supply of cheap money allowed continued unfunded promises to be made.
The Governments allowed this to happen – no fiscal conservatism at all – no stronger lending regulations to limited the impact on indebted individuals. In fact the suicide rates in Canada, US and the U.K. have risen – middle class and lower class suicide rates increased dramatically – but do the Governments care?
Did the US Medical Journal decline to print a detailed Scientific report of the increase in suicide rates for middle income white folks – that started in the middle of the Clinton Era and has escalated significantly under Obama’s presidency?
No they refused – question is why?
Maybe it was politically incorrect to mention that these middle class – white people were in financial trouble – must be different if you have a skin color.
(Edit: Authors finally arranged printing but after two rejections http://www.pnas.org/cgi/doi/10.1073/pnas.1518393112)
Am I being racist?
Probably – just politically incorrect to publish? – but the facts speak for themselves – to my mind Obama’s actions over his term of his presidency speak of contempt for the Constitution.
The prior Presidents had no shame – one allied himself with the Bankers to allow repeal of the Glass Steagall Act (plus disallow bankruptcy to wipe out student loans) and the Republicans choice – a figure head operated by one big Dick.
It one looks at recent history – the calamity that is unfolding in the debt market was due to one country – the US.
I will now look at the cause – that one Government that was the root cause of all the problems today assisted by the European vassal states in Europe – UK and the other Commonwealth countries.
Yes the United States of America – an undemocratic republic – spreading US hegemony as though it were butter.
Let us presume for an instant – that the US illegal sanctions imposed on Russia – were not signed into law by Obama and supported by the US vassal states in Europe and the Commonwealth.
Would middle and northern Europe not be in a far better financial position today – if this was not the case?
What affect did these sanctions have on the US?
Nothing – nil – zilch – with the exception of profits through multi-million dollar fines imposed on various Banks and Companies that had dealings with sanctioned Russian citizens.
Sorry – Russia had a reason to protect its assets in Crimea (Krim).
It is easy how we tend to forget history – Russian history and Krim – Turkey’s incursion into Cypress – or Israeli’s incursion into the Golan Heights or the separation of Croatia.
But for some reason Russia is different – a kleptocracy which has regenerated the national fervor through the stupidity of the sanctions – yes – the Russians were not very pleased with Putin / Medvedov connection and Obama’s stupidity cemented Putin in place.
You see Russians mindset is a tad different than ours – throughout generations they were taught to despise the west generally – Obama’s stupidity in sanctions galvanized the people – they stood as one – behind their leader.
A proud race – for what they have been through they have earned this right.
The sanctions were a ‘gift’ for Putin – not only did it increase his popularity it allowed the economy to seek alternatives – more so with renewed investments in manufacturing and agriculture – the items that were dispensed with under perestroika.
And then one looks at the foreign policy of the US and see what they have achieved through their actions in Libya, Iraq and Syria – not to mention Afghanistan and Yemen. These are but a few countries in which they have meddled and I will have to pass on the former East European soviet states and Southern America.
The impact from this on Europe?
Well – Nationalism is rearing its ugly head – throughout the Club Med countries – throughout the whole of Europe through the refugee crisis.
Whose fault is this?
One could say motor-mouth Merkel – but she did see the advantage in overcoming a demographic problem in Germany itself – and ‘utilized propaganda well’ to lie to the Germans that these Syrians were well educated – had university degrees and would be a benefit to the country.
She omitted to mention the cost – the number – the religion – yes a problem with two different types of Islamic religion – Shia’s and Shi’ites – the impact on European values and the mere fact that – as a refugee free housing – money – medical.
Yes the EU is a socialist enclave – in my mind demographics suffer – when the well educated capitalists seek to earn proper income for study and their professional practice – avoid high taxes and seek work elsewhere. Not dissimilar to the brain drain in a communist country – as when you look at it – socialism is just one step up from communism.
Pity that the whole of Europe and the EU ignored the refugee plight in Italy and Greece for so long – these countries have been suffering under immense strain in processing the illegal immigrants and refugees from Libya, Iraq, Chad, Sudan for too many years – are still being denied funding – whilst Turkey is offered $3.1 billion to stop the flow of Syrian refugees.
Good move Merkel – then again you have to now assimilate close to one million refugees into the community – your own selfishness will be your countries undoing.
The refugee crisis does stem from Iraq initially and for that – yes the US – the Bush/Cheney partnership should be held accountable – as too Blair as the obedient English corgi pandering to the US requirements – but thereafter the US found an obedient NATO alliance in Libya – leading to Syria.
No leader has been charged with war crimes after Iraq – when it was obvious that not only Powell – but all parties including countries leaders and secret service were lying – blatant lies and deception – all to the gullible public.
And why not – it is so easy they – the public do forget and now France and U.K. Are at it again in Syria – bombing Syrian army positions – at the request of Obama.
Nothing changes – just the bad breath from the leaders.
So we have US hegemony providing an inundation of refugees assisted by NATO and in particular UK.
If one looks back to the 2007 financial crisis – then we have the prime cause of the situation today. President Clinton aligned himself with the American banks to repeal the Glass Steagall Act.
This action stems primarily from greed by the American banks – they just could not compete with the restriction-less European banks.
With the shackles broken and Credit Rating Agencies eager to please their masters they sold high yield AAA securities throughout the world – all toxic – made from Bank lending in the US – all due to a housing bubble blown bigger by the US Fed Reserve and the then chairman Alan Greenspan.
The financial crisis peaked with the housing bubble – when it burst it was the Bankers who persuaded politicians to bail them out with taxpayers monies – plus bail out the principal insurer AIG.
In reality a farce – economics has had financial bubbles throughout history and the bust – as it invariably does wipes out the bad banks, bad and shoddy practices, mal-investments and allows the economy to renew.
The US Government ensured that the too big to fail did not suffer financially – therein appointing Ben Bernanke – the Chairman of the Fed who undertook to buy the banks bad assets and replace them with Government paper.
In so doing decreased interest rates to zero in order to ‘stimulate’ the US and no doubt the world economies.
In reality nothing stimulated – except for Government and consumer spending.
The US Government in order to address the excesses which created the financial crisis in 2007 – then introduced a cumbersome piece of legislation – the Dodd-Frank Act.
This legislation was to curb and regulate the Banks and Futures trading – pity that the politicians were so corrupt that they allowed amendments to this legislation to suit the Banks desires and again pass liability to the taxpayer.
The financial crisis technically should have wiped out Ireland, Portugal, Switzerland and Greece – done severe damage to the UK, France and Germany – but in each instance Governments (and/or the EU) stood in the way of an economic fallout to clean up the mess.
In the main – all the designated too big to fail Banks were recapitalized – which allowed the same practices to be perpetuated.
If one looks at the aftermath no convictions – no jail terms – no penance except for financial fines.
Since 2007 – nothing has changed.
Governments have changed but the spending continues.
So here we are at the end of 2015 and the country – the prime mover behind the previous financial mess will attempt through the US Fed Reserve – to increase rates to allow ‘normalization’ in interest rates to return.
For too long countries have borrowed in excess – and now it is calm – an uneasy calm in the markets – maybe everyone is of the opinion that Janet Yellen will not increase rates.
Possible – she does take other authoritarian figures into consideration when the decision must be made – and a lot of these people are starting to ‘harp’ on the fact that any increase in the rates will create the ‘short of the century’.
If one looks at China -one may presume that the Chinese presence in the US in September was for more than an official visit – maybe – just maybe – it was their turn to request that Yellen not proceed with any rise.
The useless loop of Yuan devaluations – to offset the strengthening USD was no doubt hindering the acceptance of the currency by the IMF.
That international recognition so strongly fought for by China – acceptance into the basket of international currencies.
At the same time an entourage of the House of Saud – one country that could least afford a strengthening USD in view of the crude oil prices – and their need to invade Yemen.
In reality we will never know about China and Saudi Arabia – as this will not impact what is on the horizon – nothing can stop the slow train wreck of international sovereign countries – aided and abetted by a total lack of demand in commodities – with extremely high debt.
Increase in the US Fed Reserve rate will strengthen the USD – will extend USD loans far in excess of the initial value.
This will create a situation whereby the USD will be the ‘biggest short in history’ – watch everyone scramble to cover.
Then countries will have a big problem – the need to increase taxes – or reduce expenditure to meet the interest payments – those savings in the past that have been quickly spent by the politicians.
So yes we have the calm before the storm.
The link to the BIS Quarterly Review is below – please take the time to read the press release – at least – and realize that even the Credit Rating Agencies have not changed their procedures.
They refuse to ‘dig’ into the subordinated debt, government guarantees or the off-balance sheet financing by Governments and will not address the Emerging Market Economies lower ratings – as it is ‘difficult to assess explanatory factors hypothesis in a fully satisfactory manner” – or words to that effect.
Get the drift?
Sounds like a politician when he states – “that he did not cement that statement in his memory.”
Edit: Listed the link to the ‘Report on Deaths by Middle aged and income white males ‘