Here's my summary of the key news overnight in 90 seconds at 9 am, including news and warnings from the The Bank of International Settlements.
They are the central bankers bank and they said over the weekend that its members need to get back to their core role of fighting the upcoming rise in inflation.
Rising interest rates in countries like the US and Japan risk blowing out debt loads unless economic growth can keep pace - and things are made riskier because spending on the elderly is rising, they say. In fact, central banks can't do more without compounding the risks they have already created.
They criticised companies and households as well as the public sector for not making good use of the time bought by ultra-loose monetary policy, which they said had ended up creating new financial strains and delaying rather than encouraging necessary economic adjustments.
Bondholders in the United States alone would lose more than US$1 trillion if yields rise sharply, showing how urgent it is for governments to put their finances in order.
They also say, global banks have improved their capital ratios in part by understating the riskiness of their assets, not by raising their ability to stem losses. This window dressing could be avoided by regulating via leverage ratios, they say.
Meanwhile, last week developing nations around the world scaled back or cancelled billions of dollars of bond sales as borrowing costs climbed the most since 2008, just as spending needs increase amid slowing economic growth.
Closer to home, the BIS says the big four Aussie banks are the world's most profitable on a returns-on-assets basis. A league table shows Australian banks have lower costs than most of their peers and enjoy wider interest margins, a measure of profitability from lending.
The NZ dollar starts the week at 77.4 USc, 84.2 AUc, and the TWI is at 73.2.
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13 Comments
"They criticised companies and households as well as the public sector for not making good use of the time bought by ultra-loose monetary policy, which they said had ended up creating new financial strains and delaying rather than encouraging necessary economic adjustments".
In a word - BLAMESHIFT.
It's time some financial-type scribe - and who better than those who purport to specialise in exponential numbers? - asked the hard questions:
Was exponential growth forever, possible? If not, at what attempted 'doubling-time did it falter? If that point is visible in the rear-view mirror, what do we do about it, and when's the new Bretton Woods? The new New Deal?
"They are the central bankers bank and they said over the weekend that its members need to get back to their core role of fighting the upcoming rise in inflation."
The mantra isnt dead yet is it. As long as the likes of this lot wear such blinkers just where is growth going to come from? Growth is demand, to get demand ppl need money in their pockets, but so the BIS intends to see that the second we see a bit of wage inflation it will be killed off. Congrats on signing the death warrent of any future recovery. (Not that growth will return with our energy problem, but thats another bun fight).
Matt Simmons said (I think) he thought it would take three such 2008s for the world to finally recognise that we have some big problems....and thats going to be too late to do much about them, we're broke as it is.
regards
'...Rising interest rates risk blowing out debt loads unless economic growth can keep pace, things are made riskier because spending on the elderly is rising...'
DC - where have you been David? Debt loads have blown out. Economic growth hasn't been keeping pace. Why now is spending on the elderly adding more risk? Is it only now that these people have only discovered an aging population? What did they expect would happen? Spending on the elderly would fall? REALLY?
No worries though, just bring on QE 4 (or is it 5 or 6?, I've lost count when one finishes and the next round starts). Let's keep people guessing though by ever threatening to stop printing, yeah right....
This will solve all these problems,
- it will knock interest rates back down (those naughty things, how dare they steal from borrowers and give money to savers!),
- provide funds to get rid of those nasty bond failures that increasing seem to keep happening.
- AND provide the money to pay to the elderly, which in ever increasing numbers are becoming a larger voting block to please.
Just dandy.... nothing to see here... move on please....
Yep....but in terms of DC, do you not recall BH's pre-DC piece talking about house prices dropping? or the impact of ever increasing elderly care? in 2009?
BIS, I'd sit back and ponder what BIS is saying, I'd suggest they are highly partisan. Seen here is yet another "attack" on things like US medicare/social security. Funny thing is of course NZ spends about 1/3rd that Americans do and gets a better outcome (about $2400 v $7800)....so there is one huge fix / efficiency gain right there....which wont be taken up.
The grey power voting block is indeed one huge worry...the easy way of course is to can kick...or leave for the kids to pay off, inter-generational theft....BH has I think commented on that repeatedly as well.
regards
Hi ya steven, ... the one about house prices dropping 30%? Its more likely they go up 30% esp in Auckland (which probably is over priced).
BIS, pondering their statements, I think they are just laying ground for 'QE next round', they know this,
they are saying '...beware inflation!!!!, and beware the effects of stopping QE!!!...' they are laying a bet either way, yes, it's really a political statement, not an economic one. They are really laying the grounds for the latter though down the track.
I dont think the grey power block is 'one huge worry' steven, if you believe in democracy...
How much did JD Rockefeller leave behind? 'All of it'.
Kind regards.
The grey power voting block is indeed one huge worry..
Suggestion perhaps is to get all those who are eligible to vote to actually get out there and VOTE! That grey power voting block as you call it has IMO always voted from the time they were 21 because they saw it as their duty to do so if they wanted to have any input into how the country was run. They are still doing it - yes probably to their own advantage now and why not if other people are too lazy to have their say also.
Really Von? Democracy is indeed one huge worry...? Wow.
Most of the older generation I know are concerned about things like affordable housing for their kids (a lot so concerned they have lent their kids the deposit to get them started). Most of them are not trying to rip off their kids.
Good on the grey power people for voting I say! Id be more concerned about the breakdown in the family bonds which has really destroyed the long term wealth of so many, and the children from single parent homes who struggle to cope, many of whom are doing a great job, but 2 are better than 1...
regards,
Sorry Economist my comment wasn't meant to sound facetious to the Grey Power vote. I was repeating the grey power vote worry bit from a previous comment from someone else (don't know how to put other people's comments in italics!!). I totally agree with what you are saying. My kids are in the older age bracket i.e. 40's plus and they each have their own home albeit being started off with deposits from us parents otherwise they would still be saving. Now I worry about the world my grandchildren are inheriting. I was trying to get the point across that there a numerous people in New Zealand who don't exercise their power to vote.
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