No. of Recommendations: 14
The failure to even discuss the near universal lack of intelligent fiscal policy, especially regarding high pay-off no glory maintenance and large scale projects [usually not at all like "shovel ready" zip stimulus favored by Congress], terrifies me more than anything else.

The failure of fiscal policy is the primary reason central banks are going insane. Fiscal policy is in collapse because

1) The Euro was an abortive lurch towards a EU centralism that might have provided fiscal sanity, but they never got that far;

2) China is making up everything as it goes along, but care of their state owned zombies remains an extremely high priority and their banking is rigged around that, with Japan doing its own indecipherable Noh drama on the side;

3) Western governments increasingly have fallen under the control of demagogues "brought to you by...." interests dedicated to economic madnesses and inimical to long term thinking.

Without sane counter-cyclical taxation and budget policy, working in concert with cost effective infrastructural investment, we are doomed to monetary madness and economic stagnation animated by credit driven consumerism.

david fb
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No. of Recommendations: 7
I think it is not contestable. The Great Recession and the resulting oscillations around the world, opened all sorts of cans of work=ms - including placing a finger on the scale of European monetary stability. While the US has finally built back to a semblance of at least not being in a panic situation, it's taken about a decade. Our decisions about how to handle the disruptions we caused world-wide have differed from those used in Europe, China and elsewhere. Europe, because its fiscal diversity does not match its monetary unity has had a rougher time. That said, it seems we are in the process of copying their strategies, rather than the reverse.

Jeff
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No. of Recommendations: 5
The International Monetary Fund has presented us with a Gothic horror show...
Quantitative easing, zero interest rates, and financial repression across the board have pushed investors - and in the case of pension funds or life insurers, actually forced them - into taking on ever more risk. We have created a monster...
There are ‘amplification’ feedback loops and chain-reactions all over the place.


Thanks for the heads up, SB. Ambrose always knows how to turn a phrase while being highly informative.

For a long time, I've been seriously concerned about the very issues he expounds upon: highly leveraged deals, debt for share buybacks, covenant-free leveraged loans, and excessive debt-to Ebitda ratios. This is what Evans-Pritchard says about the IMF's concerns:

The IMF’s directors call for “urgent” action to stop these excesses but in the same breath suggest/admit that the cause of leverage fever is the easy money regime of the authorities themselves - that is to say the central banks and their political masters who refuse, understandably, to permit debt liquidation and to allow Schumpeter’s creative destruction to run its course in downturns.

https://www.telegraph.co.uk/business/2019/10/16/imf-fears-wo...

Sooner perhaps than we think, a cashflow crunch will cause a critical mass of corporate borrowers to default, requiring the debt holders to write down or write off the value of their paper assets. If the debt holders are reliant upon payments from those defaulted debtors to fund their own obligations, they will be forced to liquidate assets to raise cash for their own use. When this occurs, the most liquid assets, including stocks, will be the first things sold. Eventually, a fire sale will ensue.

That fire sale will be a much greater conflagration than it would have been if the central banks and governments had allowed the bad debts to be cleared in 2008-2009. Moral hazard will reap what it has sown as every insurance company and pension fund, including government employee pension funds, will see their own cashlow interrupted due to defaults by overleveraged high yield borrowers.

What can we expect long-term? More bailouts.
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No. of Recommendations: 14
The failure to even discuss the near universal lack of intelligent fiscal policy, especially regarding high pay-off no glory maintenance and large scale projects [usually not at all like "shovel ready" zip stimulus favored by Congress], terrifies me more than anything else.

The failure of fiscal policy is the primary reason central banks are going insane. Fiscal policy is in collapse because

1) The Euro was an abortive lurch towards a EU centralism that might have provided fiscal sanity, but they never got that far;

2) China is making up everything as it goes along, but care of their state owned zombies remains an extremely high priority and their banking is rigged around that, with Japan doing its own indecipherable Noh drama on the side;

3) Western governments increasingly have fallen under the control of demagogues "brought to you by...." interests dedicated to economic madnesses and inimical to long term thinking.

Without sane counter-cyclical taxation and budget policy, working in concert with cost effective infrastructural investment, we are doomed to monetary madness and economic stagnation animated by credit driven consumerism.

david fb
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No. of Recommendations: 3
From the article

Banks may be safer - though not in Europe or China

Banks may be safer, but I'm not so sure about my money deposited in them.

For a few year central banks via the IMF have moved towards a 'bail in' when things go wrong. Basically the banks will, one way or another, raid bank deposits to bail themselves out the next time they screw up and, make no mistake, there is always a next time.

Money deposited in banks now becomes the bank's money, the depositor becoming an unsecured creditor, even falling behind derivatives. There is some protection for smaller depositors:

As unsecured creditors, depositors and bondholders are subordinated to derivative claims. Derivatives are the investments that banks make among each other, which are supposed to be used to hedge their portfolios. However, the 25 largest banks hold more than $247 trillion in derivatives, which poses a tremendous amount of risk to the financial system. To avoid a potential calamity, the Dodd-Frank Act gives preference to derivative claims.

https://www.investopedia.com/articles/markets-economy/090716...

This has already happened in Europe:

The Cyprus Bank 'Bail-In' Is Another Crony Bankster Scam

https://www.forbes.com/sites/nathanlewis/2013/05/03/the-cypr...

Some of Europe's largest banks are in a very delicate state. Deutsche bank (German's largest) has been described as a criminal organization due to its links to organized crime:

Deutsche Bank was embroiled in a vast money-laundering operation, dubbed the Global Laundromat. Russian criminals with links to the Kremlin, the old KGB and its main successor, the FSB, used the scheme between 2010 and 2014 to move money into the western financial system. The cash involved could total $80bn, detectives believe.

https://www.theguardian.com/business/2019/apr/17/deutsche-ba...

The US bank seem to be rather more stable but, you do have The Fed. to contend with!

So, spread your money around, time consuming but smallish depositors may have more protection. Buy assets if you can afford to tie up your cash, as it will be your cash most at risk during the next crash.
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No. of Recommendations: 3
The International Monetary Fund has presented us with a Gothic horror show. The world’s financial system is more stretched, unstable, and dangerous than it was on the eve of the Lehman crisis.

The more the Illuminati (Davos, Hollywood, Central Banks, Brussel Sprouts) fix it, the worse it gets. Why is that a mystery to anyone?

The Captain
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No. of Recommendations: 0
Davitias posts:

Some of Europe's largest banks are in a very delicate state. Deutsche bank (German's largest) has been described as a criminal organization due to its links to organized crime:

"Deutsche Bank was embroiled in a vast money-laundering operation, dubbed the Global Laundromat. Russian criminals with links to the Kremlin, the old KGB and its main successor, the FSB, used the scheme between 2010 and 2014 to move money into the western financial system. The cash involved could total $80bn, detectives believe."

The US bank seem to be rather more stable but, you do have The Fed. to contend with!

So, spread your money around, time consuming but smallish depositors may have more protection. Buy assets if you can afford to tie up your cash, as it will be your cash most at risk during the next crash.

==========================================================

In another post you claimed Russia to be a stable economy compared to EU economy. But Russia is playing dirty banking games as you noted above.

As an English citizen, do you think UK will suffer from Brexit? I mean EU banks will be leaving the UK after Brexit. Even Deutsche Bank with 8,000 employees in London will impact UK economy when they leave.

jaagu
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