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Tag Archives: Central Banks

No Rescue for Italy as Long as its Debt Crisis Stays in Italy?

Outside Italy, credit markets are sanguine, and no one has mentioned “whatever it takes.” By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Italy’s government bonds are sinking and their yields are spiking. There are plenty of reasons, including possible downgrades by Moody’s and/or Standard and Poor’s later this month. If it is a one-notch downgrade, Italy’s credit rating will be one notch above junk. If it is a two-notch down-grade, as some are fearing, Italy’s credit...

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Why’s the World’s Biggest Asset Manager Advising the ECB on the Health of EU Banks?

BlackRock is “a market power that no state can control anymore.” By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. The ECB’s latest biannual stress tests are almost over. For months legions of financial regulators have been poking around in the soft financial underbellies of the Eurozone’s 130 largest banks looking for signs of weakness. Presumably, the worst causes or symptoms of financial duress have been largely sidelined or ignored, just as happened in 2016 when...

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Here Comes the ECB with a “Bubble” Warning, After it Caused the Most Absurd Bond Bubble Ever

“The ECB cannot and should not turn a blind eye to risks to financial stability.” “Maintaining financial stability is about two things: First, it is about preventing the build-up of bubbles; second, it is about making the system more resilient,” said ECB Executive Board Member and Vice-Chair of the ECB’s Supervisory Board, Sabine Lautenschläger, today in a speech. It’s not often that central bankers are allowed to use the B-word in public, except when denying that bubbles exist, or...

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“Concerned” Bank of England Raises Alarm about Growth of High-Risk Loans

The power of Collateralized  Loan Obligations. By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. “The global leveraged loan market is larger than – and growing as quickly as – the US subprime mortgage market was in 2006,” said the Bank of England’s Financial Policy Committee in the statement from its latest meeting. And the committee is “concerned by the rapid growth of leveraged lending.” In terms of magnitude, the US and EU “leveraged loan” market combined now exceeds...

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I Was Asked: Why Did All this Money-Printing Not Trigger Massive Inflation?

Asset-price inflation feels good to asset holders – until it doesn’t I was asked two important questions in this mind-boggling era of QE: The Bank of Japan has monetized 50% of its national debt; so why has there not been a surge of inflation? And why can’t the Fed restart QE and do the same without triggering inflation? “Inflation” can be a lot of things. Here we’re not talking about “monetary inflation.” We’re talking about price inflation – when the currency loses its purchasing...

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US Dollar & Emerging Market Stocks: Big-Fat Gains Turn to Big-Fat Losses

“The tide is going out and investors are starting to worry about which EM economies have been swimming naked.” It was a nice risk-on party, but now is hangover time. Emerging Markets stocks, after some rough spots in 2015, had a great 2016 and an even better 2017. Last year, the MSCI Emerging Markets index soared 34%, outperforming even the S&P 500, which also had a great year, surging 18%. The Emerging Markets stock surge was powered by hot money from the Developed Markets, as the...

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QE Party Is Drying Up, Even at the Bank of Japan

Despite repeated speeches to the contrary. As of September 30, total assets on the Bank of Japan’s elephantine balance sheet dropped by ¥5.4 trillion ($33 billion) from a month earlier, to ¥537 trillion ($4.87 trillion). It was the fourth month-over-month decline in a series that started in December. This chart shows the month-to-month changes of the balance sheet. Despite all the volatility, the trend since mid-2016 is becoming clear: Abenomics became the economic religion of Japan...

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The Global Distortions of Doom Part 1: Hyper-Indebted Zombie Corporations

It’s funny how unintended consequences so rarely turn out to be good. The intended consequences of central banks’ unprecedented tsunami of stimulus (quantitative easing, super-low interest rates and easy credit / abundant liquidity) over the past decade were: 1. Save the banks by giving them credit-money at near-zero interest that they could loan out at higher rates. Savers were thrown under the bus by super-low rates (hope you like your $1 in interest on $1,000…) but...

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Poland Makes Largest Gold Purchase in Two Decades

You can add Poland to the list of countries buying gold.The Polish central bank added about seven tons of gold to its reserves in July and another two tons in August, according to International Monetary fund data. It was the largest gold purchase by Poland since 1998.Poland’s gold bullion reserves now stand at the highest level since at least 1983, according to IMF data.A number of countries have been buying gold in recent months to diversify reserves and minimize their exposure to the US...

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US Dollar Refuses to Die as Global Reserve Currency — But Loses Ground

Chinese RMB gains, but is inconsequential as central banks remain leery. Euro hangs on. Those who’re eagerly awaiting the end of the “dollar hegemony,” or the end of the dollar as the top global reserve currency, well, they’ll need some patience, because it’s happening at a glacial pace – according to the IMF’s just released data on the “Currency Composition of Official Foreign Exchange Reserves” (COFER) for the second quarter 2018. What it confirms: Global central banks are ever so...

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