Is there going to be another crisis? Of course there is. The liberalised global financial system remains intact and unregulated, if a little battered…The question therefore becomes one of timing: when will the next crash happen? To that I offer the tentative answer: it may be imminent…[This article puts forth my explanation as to why that will likely be the case.] Words: 625
So writes Ann Pettifor (www.paecon.net) in edited excerpts from pages 15 to 20 of her original article* posted in Issue 64 of the Real-world Economics Review entitled The next crisis.
This post is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Intelligence Report newsletter (see sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Pettifor goes on to say in further edited excerpts:
With money and money-creation helpfully obscured, and regulation trained on meaningless capital adequacy targets, business is better than usual for credit-creating commercial bankers, even while their balance sheets effectively remain under water. Central banks provide liquidity for speculation; taxpayers guarantee their risk-taking, and in a strange reversal of the purpose of banking, bankers no longer lend into the economy. Instead depositors and savers lend to bankers – expecting no return. In the meantime the discipline of the invisible hand is relegated to ancient textbooks.
Central banks, by their own admission, have used money market operations – “easy, cheap money” – to “buy time” and inflate asset bubbles, enriching the asset-rich, while austerity has impoverished the wage- and income-dependent.
Western politicians remain obeisant to Big Money, and on behalf of finance capital ruthlessly extract fictitious wealth created during the credit boom from their citizens, using austerity and “re-balancing” as the cover.
Finance capital reigns supreme in political centres of power. The revolving door between the world’s biggest banks – Goldman Sachs, JP Morgan Chase and Citigroup – and finance ministries, central banks and political institutions – keeps revolving and by that means maintains the status quo.
Banks, firms and households in western economies are still burdened by debts that will never be repaid. Much of that debt is phantom wealth, created out of thin air during the boom years. Behind the smokescreen of ‘austerity’ governments are colluding with finance capital to confiscate that wealth, and use it to shore up the private banking sector: “converting fictitious claims into more tangible gains” to quote David Lizoian.
Bankers (and their friends in political and regulatory institutions) lie about their balance sheets, fleece taxpayers, laugh about taking taxpayers to the cleaners…and simply ‘extend and pretend’ that assets on their balance sheets will be repaid. Furthermore, globalised banks have not been re-structured, thanks to effective lobbying of spineless politicians. They remain far too interconnected and will therefore once again transmit failure across the globe at the speed of lightning…
The Federal Reserve’s recent, sudden change of direction has rattled bond markets and caused yields to rise. Only yesterday it seems, the Fed was offering long-term calendar guidance (through to 2015) on the direction of interest rates. Now that guidance, and date, has been dropped in favour of new, less predictable economic data: the 6.5% unemployment threshold.
The Fed it seems is (rightly) worried about deflation which in the words of Governor Bernanke “raises real interest rates… (and) means that debt deleveraging takes place more slowly”. Furthermore, it seems the Fed is beginning to regret that its punchbowl of QE I, II and III, has so enriched the already-rich including speculators and those engaged in the carry trade (“big money does organise itself somewhat like feral hogs” said the President of the Dallas Federal Reserve recently) – while having little impact on unemployment, which remains stubbornly high…
Markets have taken fright at the Fed’s new emphasis on the unemployment threshold, and bond yields have risen. US Treasury Bond prices fell on 19 June, and the benchmark ten-year yield rose to its (current) 2.51%…
Debt burdens remain high, and interest rates look to be tightening, just as central bankers become impatient at the failure of politicians and bankers to make structural fixes.
The question then becomes: when do spikes in interest rates become daggers aimed at bursting today’s huge government bond/debt bubble? Soon, in my humble opinion.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
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We had previously speculated that the 30-year bond rate would continue downward to around 2% based upon a number of very long-term charts. Short-term charts, however, are showing strong technical evidence that interest rates may be turning up in the long term. Words: 267; Charts: 2 Read More »
Don’t get too worked up over interest on the national debt or what will happen when interest rates rise because, by then, we’ll likely be talking about ways to cool down the economy. [Why?] Because interest rates on US government debt are really a function of economic growth. If the economy is weak the Fed will pin short rates to stimulate the economy and if rates rise it’s going to be a function of better days ahead. Words: 525
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