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Old 01-08-2019, 03:38 PM
Danny B Danny B is online now
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Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,281
The CBs wind down liquidity, finance cried in their champagne

"• Global Liquidity falling at its fastest rate since 2007/08 Crisis

• Over-zealous Central Banks are largely to blame. Not a broken banking system like 2007/08 Crisis
They are over-zealous if they don't keep pumping up the bubble. The finance community doesn't care how much damage is done by QE, they never want the party to stop.
"World private sector liquidity has fallen by some US$3 trillion, with roughly two thirds of the drop coming from the Developed economies, while World Central Bank liquidity has fallen by another US$1.1 trillion, with two-thirds of its drop recorded in Emerging Markets, paced by their large foreign reserve losses. Added together, Global Liquidity has in total fallen by just over US$4 trillion to US$124.1 trillion.

This 3% drop looks more serious when set against its 7% ‘normal’ trend. Put another way, after its brief recovery Global Liquidity has fallen back again to stand some 25% below its long-term trend."
ALL BS. It's RECENT long term trend since the FED started pumping about 1989. A 30 year bond bull market does wonders for the private sectors but, it destroys the public debt sector.
"Central Banks have an outsized-effect in deregulated financial systems, where retail deposits are not the sole funding source, because what matters most is the ability to re-finance positions and at the margin Central Banks are the marginal suppliers of liquidity. Put another way liquidity is not fungible in crises, the very times that it matters most, and so Central Bank interventions are required. "
Nope, we can't let any institution fail.

"Figure 2 shows the dramatic expansion in the size of the US dollar money markets to around US$9 trillion and the dominant role played by the US Federal Reserve in the period since 1980. These markets have increasingly supplemented retail deposits and now fund a rising proportion of US credit and liquidity, notably wholesale lending activity."
Thank you Alan Greenspan, you juiced it all up and, screwed anybody who wasn't connected to the free money spigot.

"Consequently, traditional banks do not face the same funding constraints as other financial intermediaries, so making their lending more elastic. In theory, as long as capital requirements are met, the traditional banking system can accommodate additional credit demands by simply creating new means of payment in the process of making new loans."
Love that elasticity. The lower loop calls it inflation.
"However, shadow banks largely repackage and recycle existing savings. By lengthening intermediation chains they became involved in large volumes of wholesale funding, without creating much new lending. The data show that they are involved in 66% of gross funding, but directly account for barely 15% of new lending. Shadow banks, therefore, increase the elasticity of the traditional banking system by relaxing banks’ capital requirements, through, say, selling loans externally to GSEs or internally to off balance sheet vehicles, so boosting the credit multiplier. "
They have over-stretched the elastic with too many multipliers.

" Yet, shadow banks could not have originated the credit boom that preceded the 2007/08 Crisis, since they themselves depend on bank credit. The fragility of this wholesale funding model based on short-term repos has heightened systemic risks, not least because it is market collateral-based and highly pro-cyclical, and it always threatens to feed-back negatively on to the funding"
Keep running faster an faster.

"Therefore, we suggest that, unlike the 2007/08 Crisis which was more about a broken banking system involving the sudden collapse of leverage among over-extended banks and shadow banks, the current credit squeeze looks more like the 1997/98 Asian Crisis when Central Banks, led by the US Fed, tightened the supply of primary liquidity and cross-border flows rapidly retreated. This time around financial markets are probably even more interconnected and more global. Consequently, this could be an Asian Crisis-like sell-off, but one not only confined to Asia. "
" sudden collapse of leverage" No mention of default by home buyers.

"The explanation for this collapse is that in the run-up to 2007/08 shadow banks had been borrowing against new collateral, such as US dollar deposits, and re-hypothecating existing collateral (i.e. the so-called collateral multiplier) to create what might be dubbed a ‘shadow monetary base’"
So, you multiplied my house.

Kunstler, "The national chain retail model has fallen apart, along with new car sales. Something is up in this foundering land, despite all the heraldic trumpet blasts on cable news about the “booming economy.”

What’s up is the international implosion of the bad debt, and the fading illusion that it doesn’t matter. It has any number of ways to express itself, from store closings, to dissolving pensions, to stock market instability, to divorce, homelessness, and war. It’s what you get from a hyper-financialized economy that doesn’t really produce wealth but only steals it from somewhere else."
"Zero interest rates made savings a mug’s game, and zero interest rates were necessary to extend the borrowing far beyond the credible boundaries of repayment. Debt isn’t capital, it just pretends to be for a period of time. Wall Street made its trillions off the time-value of that pretence and now time is up."
A Farewell to "Bargain Shopping" - Kunstler

1/08 California’s new governor needs to address pension crisis – LA Times
Democrat proposes government-funded healthcare for all illegal ..
I'm sure that they will get all of this worked out.
1/08 Cities across OC struggle with law enforcement and fire pensions – Voice OC
I'm sure that orange County will get all of this worked out.

1/08 Chairman of Germany’s far-right party brutally beaten in “assassination attempt” – ZH
This "far right" wants Germany to be for Germans, NOT worthless rabble from north Africa.
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