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It’s now clear that what governments did to counter the Great Recession may have delayed systemic collapse, but did not resurrect the old normal. Growth around the world is anemic – which is to say debt continues to increase faster than the productive capacity to service it – and inflation (the other way to shrink a debt burden) remains below target.

Now “anemic” is becoming “non-existent.” In the US, mini-credit-bubbles like auto loans, home mortgages and student loans are sputtering, leading economists to dial back their rosy scenarios for 2016. The Atlanta Fed’s GDPNow forecast for Q3 growth, for instance, was a robust 3.8% in August but is now less than 2% — and still falling.

Not surprisingly, everyone is starting to panic. In the UK, where admittedly Brexit has created a unique situation:

Mark Carney: Bank of England will tolerate higher inflation for the sake of growth

(Telegraph) – Official data on Friday showed house building, infrastructure and public construction all slumped in August, indicating that the UK’s building industry is slowing sharply and could even enter a recession. Construction output dropped by 1.5pc in the month, an unexpected drop after growth of 0.6pc in July, according to the Office for National Statistics. Separate Bank of England figures showed banks suffered a big drop in demand in the months following the Brexit vote as fewer Britons were prepared to take major financial decisions. Demand for mortgages dipped strongly, with a net balance of 44pc of banks reporting a fall in customer interest – the biggest negative score in almost two years.

Bank of England Governor Mark Carney told an audience in Nottingham that the current environment of low inflation was “going to change”, with the drop in the value of the pound likely to push up prices across the economy.

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

First Post-Brexit Bailout Looms As Bank Of England Mulls UK Property Fund ‘Measures’

July 10, 2016

First Post-Brexit Bailout Looms As Bank Of England Mulls UK Property Fund ‘Measures’

Who could have seen that coming? While many have questioned the “suitability of daily-traded, open-ended property funds that are giving investors access to an illiquid asset,” all the time the price is rising, no one wants to rock the boat. However, now that Brexit has rocked the boat, spoiling the party for UK property investors and asset managers alike, it’s time for Carney to ride to the tax-payer-funded bailout rescue to ensure Bear Stearns 2.0 does not become Lehman 2.0…

Following the gating – or forced haircuts – of eight large UK property investment funds this week, fears have grown rapildy of the risk of contagion, which, as The FT reports, is much greater than first feared, with detailed analysis showing that a wide pool of funds have been caught up in the gates imposed on investors withdrawing cash.

The worry is that this will trigger systemic problems for the marketplace, which is already reeling from the UK’s decision last month to end its membership of the EU.

A prominent UK fund manager, speaking on condition of anonymity, said: “When you start getting daily trading funds-of-funds investing in daily trading funds that are invested in illiquid assets, that seems to be layering up potential liquidity risks. “[Investors need to] consider the impact on funds that are caught with material investments in the gated property funds.”

Three multi-asset funds run by Henderson also have around 3.5 per cent of their assets in the company’s own suspended property fund, while Aviva Investors’ multi-asset product has a 4 per cent stake in its gated property fund.

Many other multi-asset funds — one of the fastest-selling investment strategies of the past 12 months — run by rival investment managers have also been caught out by the property fund suspensions.

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

Central Bankers Around The Globle Scramble To Defend Markets: BOE Pledges $345BN; ECB, Others Promise Liquidity

June 24, 2016

Central Bankers Around The Globle Scramble To Defend Markets: BOE Pledges $345BN; ECB, Others Promise Liquidity

There was a reason why we warned readers two days ago that “The World’s Central Bankers Are Gathering At The BIS’ Basel Tower Ahead Of The Brexit Result“: simply enough, it was to facilitate an immediate response when a worst-cased Brexit vote hit. And that is precisely what has happened today in the aftermath of the historic British decision to exit the EU.

It started, as one would expect, with Mark Carney who said the Bank of England is ready to pump billions of pounds into the financial system as he stands at the front line of Britain’s defense against a Brexit-provoked market crisis. The BOE governor declared that the central bank can provide an extra 250 billion pounds ($345 billion) through its existing facilities. It also has further measures if needed to deal with what he described as a “period of uncertainty and adjustment” after Britons voted to end their 43-year membership of the world’s largest single market.

The pound plunged to a three-decade low, British and global stocks tumbled and European bond spreads widened as the Brexit vote unfolded on Friday. Investor bets on a July interest-rate cut rose and Standard & Poor’s said the U.K. will lose its top credit rating.

“Some market and economic volatility can be expected as this process unfolds,” Carney said in a televised statement in London after the referendum result. His comments followed Prime Minister David Cameron’s announcement that he will step down this year, which will inject political uncertainty into an already volatile period. His full announcement is below and his statement can be found here:

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

Another Stern Stock Market Crash Warning Was Just Issued by the IMF

May 29, 2016

Another Stern Stock Market Crash Warning Was Just Issued by the IMF

Another stern stock market crash warning was just issued from the International Monetary Fund (IMF), and it’s fueling fear across global markets.

The IMF, an organization of 189 countries, is worried about the ripple effects should the United Kingdom vote to leave the European Union (EU).

A British vote to exit the EU, or “Brexit,” could have significant and negative effects on the UK economy, the IMF said last Friday. The quickly approaching Brexit voting date is June 23.

Christine Lagarde, the IMF’s managing director, said nothing positive could come from a Brexit. She cautioned a vote in favor of a Brexit could lead to a technical recession. Bank of England Governor Mark Carney shares a similar sentiment.

Dow Jones Industrial Average That has many investors worried that tensions overseas could lead to a 2016 stock market crash…

A Brexit vote would cause a “protracted period of heightened uncertainty” and “severe regional and global damage,” the IMF warned. A spike in interest rates, extreme financial market volatility, and damage to London’s revered status as a global financial hub are all likely outcomes.

Other concerns include falling stock prices, a plunge in real estate values, surging borrowing costs for businesses and households, and a steep drop-off in foreign investment.

The UK’s economy could contract by 1% to 9% following a Brexit, according to the IMF’s research. If the UK chooses to stay in the 28-country bloc next month, the IMF expects the economy to grow about 2% this year and around 2.25% in 2017.

And the issue isn’t isolated to the United Kingdom. All global economies will be affected, which is what has sparked the stock market crash fears.

Atlanta U.S. Federal Reserve President Dennis Lockhart said last month that a vote for the UK to leave the EU might have destabilizing consequences for the world economy.

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

Albert Edwards Explains Why The “Global Economy Will Be Thrown Into Chaos”

November 13, 2015

Albert Edwards Explains Why The “Global Economy Will Be Thrown Into Chaos”

SocGen’s permarealist, Albert Edwards, has been the one person who for the past decade has firmly held the belief that a “deflationary Ice Age” is upon the world – courtesy of an unmanageable debt load – no matter what central banks do.

There is, of course, one way to short circuit said Ice Age, and it involves paradropping money in an act of terminal fiat desperation (the outcome is always hyperinflation) onto the general population, something which as we reported last Friday is already in the works courtesy of first Adair Turner and the IMF, and soon all other “very serious people”. Keep an eye on Japan as this is where said paradropping will be attempted first as Ben Bernanke suggested back in 2003 when he said to “consider for example a tax cut for households and businesses that is explicitly coupled with incremental Bank of Japan purchases of government debt – so that the tax cut is in effect financed by money creation.”

But before we get there, here is a snapshot of where, according to Edwards, we are now and why “there” is getting very close.

In his latest note he says, quite simply, that it is now too late to put the “Orc-like monster” of excess debt and declining cash flows back in the bottle, and why “the global economy will be thrown into chaos.”

The deeply held wish of central bankers not to de-rail the fragile economic recovery is on display for all to see as they grasp at the slightest excuse for their continued inaction. The UK’s central bank governor, Mark Carney, exceeded all dovish expectations recently in his latest rate flip-floppery. But what is this? The Fed has finally summoned up its courage and looks set to raise rates next month.

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

Mark Carney wants business to calculate the fossil fuel future: Don Pittis

October 1, 2015

Mark Carney wants business to calculate the fossil fuel future: Don Pittis

Bank of England governor’s climate change warning puts the focus on the bottom line

No doubt Bank of England governor Mark Carney has personal views on whether or not climate change is a danger to his children’s future. Most thoughtful people do.

But when the former Bank of Canada governor spoke to a high-powered audience of insurance executives this week, unlike environmentalists such as Leonardo DiCaprio, he didn’t emphasize their moral obligation to future generations. Perhaps after the VW scandal, he realized there was a more direct way to a businessperson’s heart.

He appealed to their bottom line.

“Changes in policy, technology and physical risks could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent,” he told the group.

“Longer-term risks could have severe impacts on you and your policyholders.”

When New Democratic Party candidate Linda McQuaig raised some of the same issues in the current federal election campaign, saying part of Canada’s fossil fuel resources might have to be left in the ground, it played as a left-right issue.

Dwayne Roy checks an active well site near Lloydminster, Sask., this summer. Bank of England governor Mark Carney says investors must realize oil may have to be left in the ground. (Reuters)

“For the hundreds of thousands of people whose jobs are dependent on Canada’s energy sector, listen to what you just heard,” responded Conservative candidate Michelle Rempel.

Profit and loss, not left and right

But for Carney’s audience at a Lloyd’s of London black tie dinner, the issue is not a matter of left or right politics, but a matter of profit and loss.

Insurance companies often pay the bills when storms and flooding do their damage. Climate change is likely to make those insurable crises worse.

But perhaps more important, against those potential losses, insurance companies hold trillions of dollars in assets invested in all kinds of stocks and bonds. And Carney said those assets were threatened.

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

Bank Of England Accidentally E-mails Top-Secret Brexit Plan To Newspaper

May 23, 2015

Bank Of England Accidentally E-mails Top-Secret Brexit Plan To Newspaper

The first rule of “Project Bookend” is that you don’t talk about “Project Bookend.”

In retrospect, maybe the first rule should have been “you don’t accidentally e-mail ‘Project Bookend’ to a news agency”, because as the Guardian reports, one of its editors opened his inbox and was surprised to find a message from the BOE’s Head of Press Jeremy Harrison outlining the UK financial market equivalent of the Manhattan project.

Project Bookend is a secret (or ‘was’ a secret) initiative undertaken by the BOE to study what the fallout might be from a potential ‘Brexit’, but if anyone asked what Sir Jon Cunliffe and a few senior staffers were up to, they were instructed to say that they were busy investigating “a broad range of European economic issues.”

Here’s more from The Guardian:

Bank of England officials are secretly researching the financial shocks that could hit Britain if there is a vote to leave the European Union in the forthcoming referendum.

The Bank blew its cover on Friday when it accidentally emailed details of the project – including how the bank intended to fend off any inquiries about its work – direct to the Guardian.

According to the confidential email, the press and most staff in Threadneedle Street must be kept in the dark about the work underway, which has been dubbed Project Bookend…

MPs are now likely to ask whether the Bank intended to inform parliament that a major review of Britain’s prospects outside the EU was being undertaken by the institution that acts as the UK’s main financial regulator. Carney is also likely to come under pressure within the Bank to reveal whether there are other undercover projects underway.

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

Canada’s Central Bank is Headed by a Comedian

April 23, 2015

Canada’s Central Bank is Headed by a Comedian

Yet Another Delusional Bubble Blower

Canada is home to one of the most egregious housing and credit bubbles in the world – a legacy of its former central bank governor Mark Carney, who is now blowing a similarly dangerous bubble in the UK as governor of the Bank of England. For some background information on this, see:

Carney’s Legacy: Canada’s Credit and Housing Bubble

Mark Carney: If There is a Bubble, It’s Not Our Fault

A Tale of Two Bubbles

After having slashed interest rates to the bone in Canada and instigating a mortgage credit and consumer lending boom that has inter alia led to one third of Canadians complaining that they can no longer sleep properly due to worries about their huge debt loads, Mr. Carney is now presiding over this in the UK:

The BoE’s current base rate is the lowest since the central bank was founded in the late 17^th century – click to enlarge.

Stephen Poloz picked evidently up where Carney left off. While the data on Canada’s housing bubble are plain as day to anyone with a set of eyes and an IQ temperature above 80, the comedian who has become Mr. Carney’s replacement as governor of the Bank of Canada somehow just can’t see it. This is highly reminiscent of Ben Bernanke’s frequent denials in 2006 that there was a housing bubble in the US, even as the bubble became so freaking obvious one literally had to be in a coma not to see it. From a tweet by Forex Live in December last year:

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

Mark Carney defends Bank of England over climate change study

March 11, 2015

Mark Carney defends Bank of England over climate change study

Governor hits back at Nigel Lawson’s description of research into effects of global warming on insurance industry as ‘green claptrap’

Climate change is one of the biggest risks facing the insurance industry, the governor of the Bank of England has said after a former Conservative chancellor dismissed a study on global warming as “green claptrap”.

Speaking at the House of Lords, Mark Carney mounted a robust defence of the Bank’s work on the impact of climate change on the insurance industry in the face of claims by Nigel Lawson that it had its priorities wrong.

Lawson, who has claimed “there is no global warming to speak of going on at the moment”, a view that puts him outside the overwhelming scientific consensus, attacked the bank for “focusing on green claptrap” rather than the remaining problems in the UK’s financial sector.

Lawson was referring to a recent speech by Paul Fisher, a senior policymaker at the Bank, who warned insurers they could take a “huge hit” by investing in fossil fuels, which could collapse in value if action is taken to curb greenhouse gas emissions in line with scientific advice. Fisher is deputy head of the Bank’s Prudential Regulation Authority, which supervises insurers and banks with the aim of ensuring financial stability.

The Bank has recently surveyed the insurance industry on its fossil fuel investments, as it investigates the risk of an economic crash if action on climate change renders oil and gas assets worthless. The contribution from Threadneedle Street is expected to be published after the election by the Department for Environment, Food and Rural Affairs (Defra) as part of a bigger report on the impact of climate change.

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

‘The Communist Manifesto’ (2015 edition)

February 7, 2015

‘The Communist Manifesto’ (2015 edition)

In the Communist Manifesto, Karl Marx wrote that “a specter is haunting Europe — the specter of communism.”
That image has been much adapted. The specters that have been held to haunt the Europe of today include Americanization, privatization, the far right, and the breakup of the euro, among others. Mark Carney, the governor of the Bank of England, said recently that today’s haunting specter is “economic stagnation,” daring to invoke Marx from the heart of the City of London.

But now, the original specter in 1848, wandering unheeded for many decades, is back, hovering again over the old continent. Communism is again haunting Europe.

Syriza, which won the Greek parliamentary elections last month and is the dominant party in the country’s coalition government, is a layered confection of mainly hard-left parties, survivors of — and combatants in — the splits, wars and betrayals of a Greek left whose members had been, over the years since the war, outlawed, imprisoned, tortured and, in the last three decades, marginalized.

The new prime minister, Alexis Tsipras, was a leader of the youth wing of one of the communist parties. Its finance minister, Yanis Varoufakis, says he is a libertarian Marxist. The party has promised to raise wages, rehire sacked public-sector workers and nationalize sectors of the economy. In an interview with Britain’s Channel Four news, Varoufakis said that his government would confront the “oligarchic system” in Greece — the mix of political leaders, wealthy business people and their media — and “destroy” it.

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

Bank of England committee remains divided over interest rates rise | Business | The Guardian

December 17, 2014

Bank of England committee remains divided over interest rates rise | Business | The Guardian.

The Bank of England’s interest rate setting committee was split in the last month of this year after two members maintained their view that forecasts of higher wages next year should be offset by higher credit costs.

Martin Weale and Ian McCafferty, who have voted for a rate hike since August, said at the monetary police committee’s December meeting that the current dip in inflation was clouding the vision of the Bank, which should beware runaway prices in 2016 without an early rise in interest rates.

The pair argued that below target inflation, which hit 1% in November, was largely the result of a higher exchange rate and lower raw material prices.

But the MPC voted five to two in favour of keeping interest rates at 0.5%, according to minutes published on Wednesday.

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

New rules proposed to put an end ‘too big to fail’ banks | Reuters

November 10, 2014

New rules proposed to put an end ‘too big to fail’ banks | Reuters.

(Reuters) – Global regulators on Monday proposed new rules to ensure that bank creditors rather than taxpayers pick up the bill when a big lender collapses.

Mark Carney, chairman of the Financial Stability Board and Bank of England governor, said the plans marked a watershed in ending banks that are too big to be allowed to fail.

“Once implemented, these agreements will play important roles in enabling globally systemic banks to be resolved (wound down) without recourse to public subsidy and without disruption to the wider financial system,” Carney said in a statement.

After the financial crisis in 2007-2009, governments had to spend billions of dollars of taxpayer money to rescue banks that ran into trouble and could have threatened global financial system if allowed to go under.

Since then, regulators from the Group of 20 economies have been trying to find ways to prevent this happening again.

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

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