Juggling Dynamite

Interesting way of framing the issues, “it’s not debt” that’s the problem says King in the below CBC interview, “it’s the imbalance between spending and saving”. In other words, central bankers encouraged overspending, under-saving habits with continual easing efforts over the past 20 years, and now the credit monster has turned on us, ravaging world growth and terrifying its architects. They can’t admit their theories were recklessly misguided, but those like King (and Greenspan) who have left office are now trying to warn that the global banking crisis is coming round again.

This reminds of the Bank of England’s 2011 QE impact report that included the below chart outlining their expected economic impact on money supply, inflation, GDP and asset prices (see red line).  They always saw the dramatic spike in asset prices as temporary with full mean reversion thereafter.  They had hoped the economy and banking system would have recovered enough strength to withstand the next financial market shock.  But it hasn’t and leverage and debt have grown much larger in the past 5 years.  It’s the mean reversion phase overdue in asset prices which is haunting the consensus now…

Former Bank of England governor Mervyn King, who has penned a book, says global banking system must change to avoid another financial catastrophe. Here is a direct video link.

“…we are witnessing the start of a new (but long overdue) trend this year. The few established automakers still pushing fuel cell hydrogen vehicles appear to be warming up to battery-powered electric vehicles instead. Honda, Toyota and Hyundai, arguably the automakers most stuck on hydrogen, all announced new electric vehicle programs in the past few weeks.

Toyota is working on a plug-in version of the Corolla. Hyundai is bringing its Ioniq electric platform to market by the end of the year and this morning, we reported on the Korea-based automaker developing a next generation battery-powered electric SUV.”

See:  Automakers entrenched in fuel cell hydrogen are succumbing to physics and going electric.

Former Finance Minister of Greece Yanis Varoufakis was teaching economics at the University of Texas at Austin when he was elected to Greek parliament by a landslide vote in January 2015. In his book, And the Weak Suffer What They Must? Europe’s Crisis and America’s Economic Future, Varoufakis details how the European Central Bank, International Monetary Fund, and European Commission collectively ignored the warning signs of a financial crisis and instead choose to act on shortsighted interests. He also explains how the United States, a major player in Europe’s financial history, can help the financial crisis. Here is a direct audio link.