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In A World Of Artificial Liquidity – Cash Is King
In A World Of Artificial Liquidity – Cash Is King
Global central banks are afraid. Before Greece tried to stand up to the Troika, they were merely worried. Now it’s clear that no matter what they tell themselves and the world about the necessity or even righteousness of their monetary policies, liquidity can still disappear in an instant. Or at least, that’s what they should be thinking.
The Federal Reserve and US government led policy of injecting liquidity into the US and then into the worldwide financial system has resulted in the issuance of trillions of dollars of debt, recycling it through the largest private banks, and driving rates to 0% — or below. The combined book of debt that the Fed and European Central Bank (ECB) hold is $7 trillion. None of that has gone remotely into fixing the real global economy. Nor have the banks that have ben aided by this cheap money increased lending to the real economy. Instead, they have hoarded their bounty of cash. It’s not so much whether this game can continue for the near future on an international scale. It can. It is. The bigger problem is that central banks have no plan B in the event of a massive liquidity event.
Some central bank entity leaders have admitted this. IMF chief, Christine Lagarde for instance, warned Federal Reserve Chair, Janet Yellen that potential US rate hikes implemented too soon, would incite greater systemic calamity. She’s not wrong. That’s what we’ve come to: a financial system reliant on external stimulus to survive.
These “emergency” measures were supposed to have healed the problems that caused the financial crisis of 2008 — the excessive leverage, the toxic assets wrapped in complex derivatives, the resultant credit and liquidity crunch that occurred when banks lost faith in each other. Meanwhile, the infusion of cheap money and liquidity into banks gave a select few of them more power over a greater pool of capital than ever.
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Younger workers more likely to see less income in retirement, CIBC says Average person born in ’80s and after may see only 70% of pre-retirement income, economist Benjamin Tal says
Average person born in ’80s and after may see only 70% of pre-retirement income, economist Benjamin Tal says
Urgent attention needs to be given to what Canadians can expect to get in retirement income — something that’s become a real divide along generational lines, a prominent Canadian economist says.
In a note to clients this week, Benjamin Tal at CIBC waded into the ongoing debate over Canada’s looming pension and retirement crisis.
While falling well short of endorsing any of the myriad proposals out there to fix the problem, including beefing up the Canada Pension Plan, encouraging more individual savings by expanding RRSPs and TFSAs or something else, Tal is unequivocal in his view that declining retirement income is a problem needing a solution — and soon.
After running a simulation of pension income across a wide variety of age ranges, Tal found a clear deliniation between those in retirement now or approaching it, and those who won’t get there for several years or decades.
In today’s economy, few people rely on any one source of retirement income, with most people drawing on a combination of their own investments such as RRSPs, TFSAs and real estate, government programs such as CPP and things like pension plans that they may have accrued from employers over a lifetime of work.
In general, Tal says, “the typical 70-year-old today has enough income to maintain his or her pre-retirement standard of living, taking into account the typical drop in expenses in one’s post-working years.”
Generational gap
But while millions of Canadians 65 and up are on a path to the retirement of their dreams, the data show that millions of others are headed for a steep decline in living standards in the decades ahead, particularly people who are younger and are in middle-income brackets.
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Guaranteed Financial Security Is a Fantasy
Guaranteed Financial Security Is a Fantasy
Guarantees based on extracting higher taxes, borrowing trillions of dollars and creating trillions more out of thin air only guarantee eventual systemic implosion.
It is difficult for those living through tectonic social and economic shifts to recognize the passing of one era and the emergence of a new era. We are clearly in such a tectonic shift, yet it is slow enough and uneven enough that those who hope the old era will somehow endure despite the erosion of its foundations can find evidence to support their beliefs.
1. The faith that risk can be identified and managed to the point it cannot disrupt the payment of promised pensions, benefits, yields, etc.One such cherished belief is the faith that financial security can be guaranteed. This faith has two components:
2. The faith that the system can pay what has been promised by one means or another.
If tax revenues are inadequate, taxes can always be raised. If tax revenues fail to rise, then the money needed to pay the promised pensions, benefits, etc. can be borrowed. If the money cannot be borrowed, then it can simply be created out of thin air by central banks or printed by government treasuries.
Before the advent of high finance, lowering risk could only be achieved by spreading the risk over a large populace. To lower the risk to individuals that their house would burn down in an accidental fire, insurance was sold to 1,000 homes. If one or two of the 1,000 homes burned down each year, the insurance could pay the claims and still build up reserves for future claims.
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As Greek Default Fears Return, Government Considers “Borrowing” Pensions To Repay IMF
As Greek Default Fears Return, Government Considers “Borrowing” Pensions To Repay IMF
Greek short-term default risk jumped over 300bps today putting the odds of a restructuring at 50-50 within the next year as the warnings we issued last week with regard Greece’s imminent default on its IMF loan loom. Seeking to reassure its lenders (and avoid yet more capital flight), Reuters reports the Greek government said it was “exploring solutions,” including delaying payments to suppliers or try to raise up to 3 billion euros by borrowing from state entities such as pension funds.
As Reuters reports, Athens is running out of options to fund itself despite striking a deal with the euro zone in February to extend its bailout by four months. Faced with a steep fall in revenues, it is expected to run out of cash by the end of March, possibly sooner.
“The Greek government has been exploring solutions … to ensure there won’t be a single problem with repaying the IMF loan, or its funding obligations in March,” Government Spokesman Gabriel Sakellaridis told Greek radio.So far, Athens’s other funding options have stumbled upon problems. Transferring 1.9 billion euros worth of profits the European Central Bank made on buying Greek bonds will not be allowed until Greece has completed promised reforms.
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Belgium unions protest against austerity cuts – Europe – Al Jazeera English
Belgium unions protest against austerity cuts – Europe – Al Jazeera English.
Labour unions in Belgium have begun a 24-hour nationwide strike against government policies that will extend the pension age, contain wages and cut public services.
Angry strikers gathered on Monday to protest against what they called the government’s lack of support for the Belgian economy.
An activist stood at one picket line in the capital Brussels for the country’s CSC trade union, saying protesters are here on a common front to denounce government measures.
“Austerity measures imposed by the government will cost the economy $2.5bn, and we are denouncing it because the SNCB will not be able to support this debt, this economy,” he said.
Train services like Eurostar and flights standstill, causing inconvenience for travelling passengers who thought they could catch an early escape before protests erupt.
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Leaked document: Ukraine’s government to eliminate… everything.
Leaked document: Ukraine’s government to eliminate… everything..
As the holiday season approaches you might have mistletoe on your mind for cheery, romantic reasons.
What you might not have known however is that the festive flora and its relatives are all actually parasites.
Unable to photosynthesize to feed itself, mistletoe latches on to a host plant and steals away its nutrients and water.
From the mistletoe’s point of view this may seem like a great idea… for a while.
Depleted of nutrients, the host’s growth is stunted. Branches fall off. And eventually if the mistletoe grows large enough, the entire host plant just dies.
Thus, mistletoe can quite literally eat its own self out of house and home. This isn’t exactly a solid long-term strategy.
Given their behavior it seems that most governments belong to the same genus.
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