Issues discussed:1
Banking sector issues have become clearly visible in global bank lending data.
China is the sole source source sustaining the growth of global liquidity.
Heading into the fall, the implications of the above are dire.
I thought now would be a good time to revisit the global liquidity situation. After the threat of a nationwide bank run in the U.S. in mid-March, central bankers have been ever more in a bind. Their appearance may seem calm, but internally they are struggling, because they know what kind of havoc the fastest ever rate hiking cycle (in the U.S.) has already sown. And their worry is not in vain, because something troubling is happening behind the smoothly functioning financial system.
The majority of the populace are almost completely unaware of the two close calls we already had since late-September last year, but that’s how our current financial system operates. Central banks ‘extend and pretend’, meaning they envisage never-before-seen bailout operations of markets, while most analysts play nicely along (through some, actually have no clue what’s happening). And, everyone acts as if this is normal.
Probably the biggest secret among the economic analyst community (hidden in plain sight actually) is that economists working at banks and in (most) asset management companies will generally not publicly announce that anything catastrophic could be about to happen, even if they saw it coming. People would be shocked if I could disclose all the private discussions I’ve had with my banking economist colleagues and their views on the economy. However, trust is something I do not break, and so I resort to giving vague hints instead of actual revelations.
Yet, the fact remains that a major share of the analyst community plays the tune of the central bankers, for a wide variety of reasons. I, and we at GnS Economics, have naturally not been in that group, which is why, e.g., conferences organized by central bankers not to mention their inner circles remain elusive for us. The price of pursuing for the truth, I guess.
This entry will complete the June Deprcon Outlook published past week in GnS Economics Newsletter service. There we will analyze the deepening global manufacturing recession acting as a harbinger for an actual global recession to follow and the situation in the U.S. banking system. The fate of these two are naturally inherently interwoven.
I also want to apologize that I missed a post past week. Our Outlook simply took all of my time. As a compensation, I will publish an entry on global manufacturing recession from the Outlook, which I wrote, later this week. Please note that the subscribers of GnS Economics Newsletter receive all my entries.
But, let’s now take a dive into the global liquidity situation.
Banking on the way down
Banking crisis, which commenced late-September past year, shows up clearly in the global credit data.
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