The Global Bank Credit Crisis
The comments below are an edited and abridged synopsis of an article by Tyler Durden
Globally, further falls in consumer price inflation are now unlikely and there are yet further interest rate increases to come. Bond yields are already on the rise, and a new phase of a banking crisis will be triggered.
This article looks at the factors that have come together to drive interest rates higher, destabilising the entire global banking system. The contraction of bank credit is in its early stages, and that alone will push up interest costs for borrowers. We have an old-fashioned credit crunch on our hands.
A new bout of price inflation, which more accurately is an acceleration of falling purchasing power for currencies, also leads to higher interest rates. Savage bear markets in financial and property values are bound to ensue, driving foreign investors to repatriate their funds.
This will unwind much of the $32 trillion of foreign investment in the fiat dollar which has accumulated in the last fifty-two years. And BRICS’s deliberations for replacing the dollar as a trade settlement medium could not come at a worse time.
Up for discussion: Global banking risks are increasing (contracting bank credit, interbank counterparty risks, rising bond yields, quantitative tightening, collateral liquidation, property liabilities, shadow banks, derivatives, repo markets and central bank balance sheets); the US banking system’s weak points; the new BRICS gold currency; and the euro system.
