Behind the scenes (or rather, behind the curtain of propaganda) the most influential of the banking class is sending out smoke signals. The Bank for International Settlements (BIS), which is the bank for central banks, has telegraphed the next major world financial downturn.
As if you could not see it coming. Recently, the Bank for International Settlement (BIS) warns of ‘violent’ reversal of global markets.
“Investors take zero-rates for granted and unwisely believe that central banks will protect them,” says the Capital Markets Chief of the Bank of International Settlements.
The global financial markets are dangerously stretched and may unwind with shock force as liquidity dries up, the Bank of International Settlements has warned.
Guy Debelle, head of the BIS’s market committee, said investors have become far too complacent, wrongly believing that central banks can protect them, many staking bets that are bound to “blow up” as the first sign of stress.
In a speech in Sydney, Mr. Debelle said: “The sell-off, particularly in fixed income, could be relatively violent when it comes. There are a number of investors buying assets on the presumption of a level of liquidity which is not there. This is not evident when positions are being put on, but will become readily apparent when investors attempt to exit their positions. The exits tend to get jammed unexpectedly and rapidly.
Mr. Debelle, who is also the Chief of Financial Markets at Australia’s Reserve Bank, said any sell-off could be amplified because nominal interest rates are already zero across most of the industrial world. “That is a point we haven’t started from before. There are undoubtedly positions out there which are dependent on (close to) zero funding costs. When funding costs are no longer close to zero, these positions will blow up,” he said.
The BIS warned earlier this summer that the world economy is in many respects more vulnerable to a financial crisis than it was in 2007. Debt ratios are now far higher, and emerging markets have also been drawn into the fire over the last five years. The world as whole has never been more leveraged.
Debt ratios in the developed economies have risen by 20 percentage points to 275pc of GDP since the Lehman Brothers crash. The new twist is that emerging markets have also been on a debt spree, partly as a spill-over from quantitative easing in the West. This has caused a flood of dollar liquidity into these countries that they have struggled to control. It has pushed up their debt ratios by 20 percentage points to 175pc, and much of the borrowing has been at an average real rate of 1pc that is unlikely to last.”
What more confirmation do you need? Perhaps they could have been “kind enough” to give us a timeframe. Certainly, it couldn’t make a difference. The predominate view of the financial class is the same as it ever was – with each successive bubble. All of this confirms the political nature of the U.S. Central Bank.
And how far out on a limb the financial sector has gone – to the point where they are one giant branch of the entire government-political complex. Or the veritable tail wagging the dog.
What is the BIS?
From the BIS Website:
The Bank for International Settlements (BIS) was established in 1930 in Basel, Switzerland. It is an international organization, created pursuant to an international treaty (The Hague Agreements of 1930). Its shareholding members are central banks and monetary authorities.
The mission of the BIS is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.
Telling:
The outbreak of the global financial and banking crisis in 2007-08 accelerated the transformation of the governance structure of the international financial system. As a result, the G10, long the main organizational grouping in international financial policymaking (including at the BIS), was superseded by the G20 grouping of major advanced and emerging market economies.
At the same time, the work carried out by the BIS, the IMF, the OECD and other organizations has become more integrated, not least thanks to the efforts of the FSB. Since the 1990s, the committees that meet at the BISand the secretariats it hosts have all gone through this process of widening their membership and strengthening their cooperation with other international bodies and organizations in order to remain globally representative.
The recent crisis has had a major influence on BIS research and on the work of the Basel-based committees and secretariats. Even before the crisis, BIS economists had issued warnings about the dangerous build-up of imbalances in the global financial system. The crisis has led to renewed and heightened emphasis on financial stability issues, particularly the need for a macro prudential approach to financial stability. The work of the Basel-based committees (the BCBS, CGFS, CPMI and Markets Committee) has been shaped by the need to address the challenges posed by the global financial crisis and has expanded accordingly.
This is a super hawkish statement; again, taken directly from the Institution’s official website.
Here is how the macro prudential approach boils down:
When the commercial paper markets inevitable tighten once again, we will conjure the liquidity. We will coordinate the next round of bailouts because the next drop in liquidity will be a freeze in liquidity. It will make Lehman look like a walk in the park. It makes it easy to justify the path toward world currency.
We’ve been warned. The intervention will come before hell freezes over. It will be too little too late. The systems that break will not be reflated. They will break permanently.
Yet, the monetary powers that be will do everything in their power to save in the name of the people. There is plenty of political capital. Lots of room to for implementation – to intervene with more QE.
Official inflation rates are low. Gold and silver have been hammered in percentage lock step with 2008 – even more. Both metals could run to nominal all time highs on the high octane potential of the computer dead collective-speculative short that must cover there all time high short position.
JPM and the rest of the big 4 commercials exist as a (short) shadow of themselves. They have been buying anything and everything the brain dead specs have been buying. It’s one thing that mainstream finance views the metals as only commodities. Quite another when on top of this, they are pre-programmed traded by computer “scientists”.
Plenty of new fears exist to justify the next intervention. Ebola, ISIS, Asia. Some believe that it is a planned transition to a new currency system. Some believe the big banks, even the BIS, are the orchestrators.
This may be true. No matter, the writing is once again on the wall for those who choose to believe it – but more importantly for those who chose to take action.
Here’s how psychiatrist, R.D. Laing described the social ramifications of politics in his 1967 book, The Politics of Experience:
“For Laing, the politics of experience is not just about influencing social behavior – it has an individual, inner consequence as well. Our behavior is a function of our experience. We act according to the way we see things.
If our experience is destroyed, our behavior will be destructive. If our experience is destroyed, we have lost our own selves.”