Today the UK Telegraph reports that the BIS (Bank for International Settlements) the world's most prestiguous financial body is sounding concern that years of loose monetary policy has fuelled a dangerous credit bubble, now leaving the global economy more vulnerable to another 1930's style slump.
“The BIS, the ultimate bank of central bankers, pointed to a confluence of worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.”
“The BIS said China may have repeated the disasterous errors made by Japan in the 1980's when Tokyo let rip with excess liquidity.”
Comment: low rates/cheap money has been the common denominator throughout the boom and now resulting bubbles of this cycle. The build of excessive debt and over-investment have led to periods of great pain in past cycles. The present level of leverage is not a long term sustainable model.
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