BIS Annual Report: We're Screwed
From Jon Markman's latest...
The collapse of market value since autumn has actually wiped out years of progress, putting all but a few big companies' returns for the decade below zero.
the collapse of the greatest credit bubble of all time will leave profits and price-to-earnings multiples impaired for years.
The BIS blasts Western monetary policymakers' mistakes and contends
that global markets are set for a severe downturn that will crush bulls' sunny claims that all is well.
"The facts suggest that the magnitude of problems to be faced could be much greater than many now perceive.
While difficult to predict, their interaction does appear to point to a deeper and more protracted global downturn than the consensus view seems to expect."
The BIS concludes central banks are now virtually powerless to control the destructive forces of inflation that they unleashed by maintaining a policy of easy credit for the past decade and
says the next steps taken to rein in the beasts must lead inevitably to a severe and prolonged deflation and global recession.
It observes that central banks got away with creating inflation for two decades because emerging markets provided cheap labor and cheap oil that dampened prices,
but it turns out that those factors were largely coincidental, not genius, and have proved unsustainable.
Satyajit Das: "We've had a party for 15 years, and the house is a mess. You can't clean it up in 10 minutes once you discover your parents are coming home.
You're screwed, and you have to face up to the fact that you're screwed. It's the natural process of destruction of leverage.
A company has debt, can't refinance it, has to sell the asset or go bankrupt, and the process goes on until the debt reaches a manageable level.
It's a process that central banks can smooth out by lowering rates, but they cannot actually shorten because they cannot force anyone to lend."
The collapse of market value since autumn has actually wiped out years of progress, putting all but a few big companies' returns for the decade below zero.
the collapse of the greatest credit bubble of all time will leave profits and price-to-earnings multiples impaired for years.
The BIS blasts Western monetary policymakers' mistakes and contends
that global markets are set for a severe downturn that will crush bulls' sunny claims that all is well.
"The facts suggest that the magnitude of problems to be faced could be much greater than many now perceive.
While difficult to predict, their interaction does appear to point to a deeper and more protracted global downturn than the consensus view seems to expect."
The BIS concludes central banks are now virtually powerless to control the destructive forces of inflation that they unleashed by maintaining a policy of easy credit for the past decade and
says the next steps taken to rein in the beasts must lead inevitably to a severe and prolonged deflation and global recession.
It observes that central banks got away with creating inflation for two decades because emerging markets provided cheap labor and cheap oil that dampened prices,
but it turns out that those factors were largely coincidental, not genius, and have proved unsustainable.
Satyajit Das: "We've had a party for 15 years, and the house is a mess. You can't clean it up in 10 minutes once you discover your parents are coming home.
You're screwed, and you have to face up to the fact that you're screwed. It's the natural process of destruction of leverage.
A company has debt, can't refinance it, has to sell the asset or go bankrupt, and the process goes on until the debt reaches a manageable level.
It's a process that central banks can smooth out by lowering rates, but they cannot actually shorten because they cannot force anyone to lend."
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