hello,
At the beginning I have a question for you. What is the Bank for International Settlements? It is very important question that hardly anyone devotes attention to what the Bank says.
And should be. Why?
As the Bank for International Settlements [FIS] is the most important financial institution in the world. This is called. central bank for central banks.
Surprised? Sure there are now questions why no one cites, does not pay any attention to him?
Maybe because it tells how it really is and not pulling the wool over eyes with unnecessary words. As we know, the national central banks like the FED, BOJ or ECB are independent from governments, but each of them is a member of the BIS and implements the policies outlined in Basel.
At the meetings held every two months governors of the central banks discuss about the future of the banking system in a coordinated manner to lead a global financial policy. Recently published BIS 84th Annual Report, which shows the current global economy situation in the world.
I have not found anyone who would referred to this report. That's why I'll do it myself. Very important messages contained in this document is so much that it is impossible to quote in my post all the information. So I will try to write the most important issues.
For those interested, link to full report <84th Annual Raport>
1. Economy around the world over the last few years have been artificially sustained add prints currencies. The only effect of pumping money into the economy is the growth of debt and the creation of huge speculative bubbles.
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| Source: BIS |
2. Government bond market was supported by purchases made by central banks. Within seven years the number of bonds in the hands of central banks rose from 8 billion in 2007 to 21 billion today. Increase by 161%.
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| Source: BIS |
3. In the next few years, the percentage of tax revenue allocated to the repayment of government debt will rise from 20% today to around 25%.
4. Although the last few years, economic growth was much lower than expected accumulated around him speculative bubbles, which should be immediately pierced. By understanding the market bubble of debt (bonds) and instruments based on it and the entire stock market.
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| Source: BIS |
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| Source: BIS |
5. Indicators point to the risk of financial distress.
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| Source: BIS |
Credit-to-GDP gaps in many EMEs and Switzerland are well above the threshold that indicates potential trouble. The historical record shows that credit-to-GDP gaps (the difference between the credit-to-GDP ratio and its long-term trend) above 10 percentage points have usually been followed by serious banking strains within three years.5 Residential property price gaps (the deviation of real residential property prices from their long-term trend) also point to risks: they tend to build up during a credit boom and fall two to three years before a crisis.
The most important thing is the message of the entire report. Better break out speculative bubbles leading to a controlled collapse than to wait until the scale of the distortion will increase, leading to a collapse of the system on which it is easy to lose control.
The whole situation is most ironic is that the BIS is concerned about speculative bubbles, which led to his policy, on the occasion of contributing to a significant enrichment, already the richest 1% of the population.
You can notice a slight conflict of opinion between the BIS and Mario Draghi. Let me remind you in my last entry: "In addition, the recent statement by Draghi about the situation on the financial markets as many times emphasized that it should not be a topic of discussion for representatives of civil servants (but I understand that everyone has invested some of his own funds). Draghi sees no bubble in the markets and says it will not raise rates if any will appear somewhere. In his opinion, are better macro-prudential instruments. Forging bubbles by raising interest rates is the last resort."
best regards,
oscarjp
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