Home » Posts tagged 'bank assets'

Tag Archives: bank assets

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Central Banks Rush to Protect Themselves from Incoming Disaster

January 9, 2022

Central Banks Rush to Protect Themselves from Incoming Disaster

Image courtesy of European Central Bank

The times, they are a-changin’, as Bob Dylan tells us.

On the global economic stage, the U.S. isn’t the dominant economic superpower that it once was. This conclusion comes from the declining popularity of dollars among global central banks.

Around the world, national central banks stockpile “reserves” in order to back up the value of their own national currency. Here’s how Investopedia explains monetary reserves:

  • The currency, precious metals, and other assets held by a central bank or other monetary authority
  • Monetary reserves back up the value of national currencies by providing something of value that the currency can be exchanged or redeemed for by note holders and depositors
  • Reserves themselves can either be gold or denominated in a specific currency, such as the dollar or euro

In a sense, holding any asset as part of a nation’s monetary reserves is a vote of confidence in it (which is a big reason central banks own tons of gold bars).

Here’s the concern: according to International Monetary Fund (IMF) data, the U.S. dollar (USD) has been hobbling along at a 26-year low in terms of its share of global reserve currencies.

Wolf Richter explained the specifics: “The global share of US-dollar-denominated exchange reserves declined to 59.15% in the third quarter, from 59.23% in the second quarter.”

The world is losing faith in the dollar as a safe, stable store of value. Take a look at the history of the USD share of global reserve currencies since 1967 on the chart below.

Take special note of how high the share was in 1977 (85%) before inflation spiraled out of control. Then note how much of that share disappeared by 1991:

…click on the above link to read the rest of the article…

China Accounts For Half Of All Global Debt Created Since 2005: Here Are The Implications

February 27, 2017

China Accounts For Half Of All Global Debt Created Since 2005: Here Are The Implications

Over three years ago, in November 2013, when the world’s attention was still largely focused on what the “Big 4” central banks would do with QE and/or interest rates, we wrote an article showing in one simple chart  “How In Five Short Years, China Humiliated The World’s Central Banks“, and noted that in just the brief period since the financial crisis “Chinese bank assets (and by implication liabilities) have grown by an astounding $15 trillion, bringing the total to over $24 trillion. In other words, China has expanded its financial balance sheet by 50% more than the assets of all global central banks combined.”

Fast forward to today, when not only is China’s debt the biggest wildcard for the stability of the global financial system (recall last week UBS observated that for the first time in years, the global credit impulse had tumbled to negative largely as a result of a slowdown in Chinese credit creation), but even central banks openly admit that China’s relentless debt-issuance spree is a major risk factor for global financial stability. One such bank is the NY Fed, which earlier today issued a report titled “China’s Continuing Credit Boom“, which while containing nothing that regular readers don’t already know, provides a handy snapshot of the full extent of China’s debt problems.

Here are some of the higlights:

  • Debt in China has increased dramatically in recent years, accounting for roughly one-half of all new credit created globally since 2005.
  • The country’s share of total global credit is nearly 25 percent, up from 5 percent ten years ago. By some measures (as documented below), China’s credit boom has reached the point where countries typically encounter financial stress, which could spill over to international markets given the size of the Chinese economy.

…click on the above link to read the rest of the article…

Iceland Unleashes Confiscatory “Exit Tax” On Wealth Deposits | Zero Hedge

December 11, 2014

Iceland Unleashes Confiscatory “Exit Tax” On Wealth Deposits | Zero Hedge.

While on the one hand, Iceland’s decision to inch towards lifting its capital controls is a positive step, it appears what they give with one hand they are taking with another. Just as we predicted three years ago,the muddle-through has failed and there are only hard choices left and sure enough BCG’s envisioned ‘wealth tax’ appears to be rearing its ugly head once more. As Morgunbladid reports, Iceland plans to impose an exit tax as part of removing capital controls, anticipating all bank assets will be subject to the levy, regardless of whether assets are held in local (ISK) or foreign exchange.

As Bloomberg reports,

Iceland’s plan to impose an exit tax as part of removing capital controls anticipates all bank assets will be subject to levy, regardless of whether assets are held in ISK or FX,Morgunbladid reports without saying how it obtained the information.

Part of program may also include forcing foreign holders of ISK assets to swap ISK at discount to a 30-yr FX bond; bond to carry interest rate less than 3%: Morgunbladid

NOTE: Iceland task force on capital controls’ removal met yesterday with representatives of Kaupthing Bank hf, Glitnir Bank hf and LBI hf. The country may proceed with lifting controls early next year, according to task force member Lee C. Buchheit

As we concluded previously,

…click on the above link to read the rest of the article…

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress