Another Monday, another rocky day

In Financial competency on 24/06/2013 at 5:51 am

BIS’s weekend statement will spook mkts. It tells central banks to head for the exit and stop trying to spur a global economic recovery. They should focus on fighting inflation.

CENTRAL banks are unable to repair banks’ broken balance sheets, to put public finances back on a sustainable footing, to raise potential output through structural reform. What they can do is to buy time for those painful actions to be taken. But that time, provided through unprecedented programmes of monetary stimulus since the financial crisis of 2008, has been misspent. Neither the public nor the private sector has done enough to reduce debt and to press ahead with urgent reforms. Yet only a forceful programme of repair and reform will allow economies to return to strong and sustainable growth.

That is the message from the Bank for International Settlements (BIS), the closest that central bankers have to a clearing-house for their views. Based in Basel, the BIS can point to prescience before the financial crisis, when William White, then its chief economist, worried that excessive credit growth was generating bubbles that could burst in a messy fashion.

And SunT yesterday had an article “pushing” US junk bonds. SIGH

  1. China,June 20, 2013, this crazy day, enough to load the Chinese inter-bank market history. Day, overnight bank repo rate up to an unprecedented 30 percent, seven-day repo rate up to 28%. In recent years, a very long time, these two rates are often less than 3%.

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