Are Banks Finally Ready To Start Lending?

In normal times, today’s combination of record low interest rates and massive infusions of capital into the banking system would ignite the mother of all expansions. That it hasn’t has confused the economists whose textbooks clearly state that it should. And it has convinced the Fed to just keep upping the ante with QE after QE.

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Collateral Transformation: The Latest, Greatest Financial Weapon of Mass Destruction

In 2002 Warren Buffet proclaimed that derivatives were ‘financial weapons of mass destruction’ (FWMDs). And he was proven correct. But who cause crises? And why? And can so-called ‘liquidity regulation’ prevent the next crisis? Let’s take a closer look at proposed liquidity regulation as a response to the growing use of ‘collateral transformation’: the latest, greatest FWMD in the arsenal.

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The Number That Matters

Friday was one of those days when so many markets move so dramatically that it’s hard to know what to focus on. But in this case the headline numbers – US stocks way up, gold way down, foreign markets all over the place — matter less than the interest rate on 10-year Treasuries, which spiked.

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Recommended Reading: It’s all one trade

The world’s finances may be reaching critical stress-points, and as Bill Fleckenstein points out in this excellent article, the recent cracks that have started to appear in the Japanese and US bond markets could be as significant as the first payment defaults that occurred during the subprime mortgage meltdown.

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Recommended Reading: Low Interest Rate Addictions

There is a great deal of debate over whether the ending of QE will adversely affect the US economy. The bulls believe that the Fed’s decision to “taper” is a reflection of an improving economic outlook. However, the bears argue that a Fed exit will trigger a spike in interest rates and a dramatic economic slowdown.

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The Big Picture: From banking crisis to sovereign debt crisis to currency crisis (diagram)

Last week’s article ‘The Big Picture: From banking crisis to sovereign debt crisis to currency crisis’, provides a brief outline of each of the macro forces and trends that are currently impacting the global economy and financial markets. Today’s article attempts to show these forces in visual form so that investors can begin to understand the interplay between them.

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The Big Picture: From banking crisis to sovereign debt crisis to currency crisis

This article attempts to outline all the macro forces and trends that are currently impacting the global economy and financial markets. It is only by understanding all of these forces (and the interplay between them) that investors can begin to see the inevitable path from banking crisis to sovereign debt crisis to currency crisis.

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Examining the global crack-up boom: Part II

Since the 2008 financial crisis central banks around the world have created in excess of $12 trillion. Not only has their policy of ultra-lose money created another unsustainable boom in asset prices, it is looking increasingly likely that it will end in what Austrian economist Ludwig von Mises called a “crack-up boom”, i.e. a complete breakdown of the monetary system.

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Examining the global crack-up boom: Part I

Since the 2008 financial crisis central banks around the world have created in excess of $12 trillion. Not only has their policy of ultra-lose money created another unsustainable boom in asset prices, it is looking increasingly likely that it will end in what Austrian economist Ludwig von Mises called a “crack-up boom”, i.e. a complete breakdown of the monetary system.

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The role of GLD and SLV

Those invested in SPDR Gold Trust (GLD) and iShares Silver Trust (SLV) must be prepared to accept a lower standard of custodial regulation. They must also be aware that GLD and SLV are only suitable for investors who look to benefit from a rising gold or silver price until they decide to take their profits. They are definitely not for those seeking a safe haven or hedge from a financial crisis.

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This will end badly but not yet

Since the onset of the global financial crisis governments and central banks have been attempting to bring about economic prosperity by creating money and pushing it out into the global economy. After almost six years however, they have failed to produce a lasting recovery, or indeed anything close.

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