[vox_mundi]

The world is defenceless against the next financial crisis, warns BIS
Monetary policymakers have run out of room to fight the next crisis with interest rates unable to go lower, the BIS warns

Central bankers have ventured beneath the "zero lower bound" on rates to combat economic weakness

The world will be unable to fight the next global financial crash as central banks have used up their ammunition trying to tackle the last crises, the Bank of International Settlements has warned.

The so-called central bank of central banks launched a scatching critique of global monetary policy in its annual report. The BIS claimed that central banks have backed themselves into a corner after repeatedly cutting interest rates to shore up their economies.

These low interest rates have in turn fuelled economic booms, encouraging excessive risk taking. Booms have then turned to busts, which policymakers have responded to with even lower rates.

Claudio Borio, head of the organisation’s monetary and economic department, said: “Persistent exceptionally low rates reflect the central banks’ and market participants’ response to the unusually weak post-crisis recovery as they fumble in the dark in search of new certainties.”

G3 real interest rates have never been so low for so long

“Rather than just reflecting the current weakness, they may in part have contributed to it by fuelling costly financial booms and busts and delaying adjustment. The result is too much debt, too little growth and too low interest rates.

"In short, low rates beget lower rates."

The BIS warned that interest rates have now been so low for so long that central banks are unequipped to fight the next crises.

“In some jurisdictions, monetary policy is already testing its outer limits, to the point of stretching the boundaries of the unthinkable,” the BIS said.

Presentation and Graphs

[americandream]

The lowering of wages is next so there are options. Of course, consumer prices will also have to fall though not equally, to ensure that the masses continue to forage.

[vox_mundi]

A deflationary spiral is to bankers what holy water or sunshine is to a vampire. They will never embrace it.

[Peak_Yeast]

Here in Denmark the interest has been rising on 30 year house morgages the past year. - From 2% to about 3½ %.

However, the wages are stagnant since EU has taken in a lot of poor eastern european countries like Lithauen. All these EECs are reducing the wages in the richer countries and contributing very little to the country they work in - since they have low wages, but at the same time has the right to all sorts of social benefits. For example a migrant polish worker can get welfare benefits for his children and wife - even if they live in poland. Also the polish worker pays almost nothing in tax because of his low wage. Besides workers from these countries has a very low morale when it comes to making legal work. Often doing it illegally and only (officially) keeping their butts just above the water line or doing breaking and entering as a side job.

However, the prices of (almost) everything is rising. I can see meat products has risen about 10-20% a year for a long time. The only places i see falling prices are: Housing outside the major cities (but rapidly rising taxation at 7% a year), softdrinks and recently fuel.

[americandream]

A deflationary spiral is to bankers what holy water or sunshine is to a vampire. They will never embrace it.

What capitalists want and what the system delivers are two separate issues.

The cost of bringing the Iron Curtain down is borne by the working class.

[Pops]

Thanks for the post Vox.

From the standpoint of interest used as a tool to fight the blahs, one might come to the conclusion that the reason we're still using it in that manner is — we're still in the fight.

My thought is maybe it isn't a fight that can be won. The ultimate goal is economic growth and the underlying fundamental of a growing economy is a growing population. The population in much of the developed world has stopped growing, or at least growing rapidly.

Young people drive spending and a larger proportion of younger people means a growing economy, looks like we are moving beyond that phase. This guy explains it well, (and I'll steal a couple of his illustrations too (others from here))











https://www.boundless.com/biology/textb ... 935-12192/

Here is another one that compares developed and un, the colors show the difference over time: black bars are 1995, gold bars are 2025. The movement of the baby boom is clear in the developed countries as is their shrinking, aging population. Ditto the tapering of the pyramid in the developing world by 2025.

The question, re: the economy, is obvious: is there enough energy for the undeveloped to make the transition to stage 4? And can we even stand for them to do it in a carbon economy?

[Fishman]

Oh darn it, these Keynesian dreams have turned into nightmares.

[americandream]

@ Pops

What ought to happen is irrelevant. Accumulation capacity in the as yet to be merged markets will be the next in line for accessing.

[onlooker]

Yet this transition to greater accumulation or economic growth in the East is logically debilitating the West. So I am not sure the West can do anything to stop the hemorrhaging and slowdown as the original post pointed out.

[onlooker]

http://www.theaustralian.com.au/busines ... 49b4cfaf?=
I put this link to the European Central Bank and how it disappointed investors with less stimulus than hoped for because it is part and parcel of how economic manipulations and maneuvers are becoming less and less effective. In this case, the debt/borrowing route is becoming less attractive for both lenders and borrowers and the Banks are finding out that quantum easing or stimulus ie. rate cuts are not having as much effect as hoped and have corollary risks of creating commodity inflation. Basically, economies around the world are bumping up to hard environmental limits and drags from years of lending and corresponding debt. So for how long can the world hold at bay things such as peak oil, automation-loss of jobs, worker exploitation, financial over leveraging and Bank lending predicated on a vibrant economy that seems to no longer exist. We shall see.