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The Masked Tulip

Imf Says Start Of Fed Tapering Threatens $2.3Tn Bond Losses

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Gillian Tett just was talking about this on Newsnight to Paxman.

The IMF reckons that tapering in the US will expose financial excesses that could wipe out trillions of dollars from the bond markets.

If long-term interest rates rise by just 1 percentage point the IMF estimates that the market losses on bond portfolios could reach $2.3tn.

Gillian Tett said that everyone thinks that tapering will producer a smooth landing but she likened it to a pilot crash-landing a plane when his engines are not working and he can only see part of the runway.

http://news.sky.com/story/1152234/imf-issues-2-3trn-warning-over-qes-end

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In its Global Financial Stability Report, the IMF warned that if investors took fright at the end of QE, pushing up the interest rates on government bonds around the world by a percentage point, investors would suffer a 5.6% loss on their bond portfolios – equivalent to $2.3trn.

The £$trillions sound a lot but a 5.6% loss doesn't sound that much. Some shareholders regularly experience that sort of fluctuation on a daily basis. In comparison there's the recent bailins of some depositors money.

Of course if by "investors" they mean bankers then of course strenuous efforts must be made to avoid any losses - at all costs and no matter what it might cost to all and sundry except them.

Edited by billybong

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So the new model of capitalism requires that 'investors' must never lose money?

How do I become one of these 'investors'? And why would anyone bother working in a world where all that is required to make money is to become such a person?

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Oh dear all this talk of tapering .... best keep printing and have a bit of a think about what to do, perhaps if they printed more, say $100 bn a month that would 'stimulate' the economy and fix everything and give the banks even more money. Win win.

Dollar scarcity is the greater threat. The collapse in dollar-denominated world trade and the ongoing contraction of the shadow banking system. Dollars are disappearing from circulation at a much faster rate than QE is replacing them.

by Michael Bird October 9, 2013, 2:06am

LEADERS of countries in the Asia-Pacific Economic Co-operation (Apec) group pledged to offset weaker growth in trade yesterday, even as the International Monetary Fund (IMF) sliced forecasts for commerce.

In a prepared statement, the countries meeting in Indonesia said: "Global growth is too weak, risks remain tilted to the downside, global trade is weakening and the economic outlook suggests growth is likely to be slower and less balanced than desired."

The group added: "We will implement prudent and responsible macroeconomic policies to ensure mutually reinforcing effect of growth and to maintain economic and financial stability in the region, and prevent negative spillover."

Confirming the trend, the IMF announced a further reduction in forecasts for growth in world trade volumes this year. Each of the organisation's world economic outlook reports this year has reduced the estimate.

Trade in goods and services was expected to grow by 3.8 per cent in January, 3.6 per cent in April, 3.1 per cent in July, and is now only thought to expand by 2.9 per cent.

- See more at: http://www.cityam.co...h.ZT3CMFXV.dpuf

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Gillian Tett said that everyone thinks that tapering will producer a smooth landing but she likened it to a pilot crash-landing a plane when his engines are not working and he can only see part of the runway.

http://news.sky.com/...ng-over-qes-end

So they just continue to print $85 billion a month, and that will solve things? Blocking opportunity for those who've saved and made good decisions, with no stomach for a recession and getting rid of the dead wood. Reason things developed into a crisis was because of no stomach for light recessions.

More of a chance for the economy with Gillian Tett's analogy, than continuing printing until the helicopter's engine packs in.

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http://www.theguardian.com/business/2013/oct/09/imf-federal-reserve-qe-tapering-rate-rises

Guardian running with it as well.

Once the printing press has been turned on it will never be turned off.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

It would appear that they are going for currency collapse.

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http://

www.theguardian.com/business/2013/oct/09/imf-federal-reserve-qe-tapering-rate-rises

The International Monetary Fund has underlined the scale of the challenge facing Janet Yellen if she is confirmed as Federal Reserve chairman by issuing a stark warning on Wednesday that phasing out quantitative easing could spark "fire sales" of assets, wiping $2.3tn off bond markets.

So a 5.6% loss is "fire sales".

I suppose it might feel like like that if you're a banker always used to being bailed out at taxpayer expense - but it's not what most people would call a fire sale.

Haven't bond markets been on a multi year bull market and yet holders can't take a relatively small loss now. Economies must be even weaker than anyone could possibly have imagined.

"Fire sales" :lol: - bunch of crooks more like.

Edited by billybong

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amazing...we bail out the system with money we end up owing to thepeople we bailed out.

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http://www.theguardian.com/business/2013/oct/09/imf-federal-reserve-qe-tapering-rate-rises

Guardian running with it as well.

Once the printing press has been turned on it will never be turned off.

It would appear that they are going for currency collapse.

The Guardian quoting von Mises without a hint of irony,that's when you know things are bad.

Edited by Sancho Panza

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Surely all that going to happen is that the inevitable real loss due to ever increasing supply (and therefore devaluation) of the $ is swapped for a nominal loss on a more stable $.

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