THE BOOGEYMAN IS DEFLATION- Michael Markowski
"Deflation is reviled by central
bankers and economists, who consider
it to be the evil twin brother of infla-
tion. Left to his or her druthers, any
sane economist or central banker would
rather deal with the problems caused by
inflation over the problems caused by
deflation on any day.
The 1930s demonstrated that defla- tion is most dangerous when debt bur- dens are heavy, as they were in the 1920s and in 2008. The lethal combi- nation of the global credit crisis and declining hard and financial asset prices have allowed the seeds of deflation to be planted in the U.S. and global economies. "
The 1930s demonstrated that defla- tion is most dangerous when debt bur- dens are heavy, as they were in the 1920s and in 2008. The lethal combi- nation of the global credit crisis and declining hard and financial asset prices have allowed the seeds of deflation to be planted in the U.S. and global economies. "
Liquidity Conditions Likely To Remain Fragile: Deutsche Bank- ValueWalk
"And this is before viewing products in SEK, DKK, CHF or JPY, where the choice is even starker than in EUR. Now, negative deposit rates and bond yields illustrate the cost of liquidity (charts 2 and 3). With negative 2y yields in 12 markets, negative 10y seen in Switzerland and Japan already and negative depo at five central banks, itself a growing count in 2016, it is apparent that if you want liquidity, increasingly you have to pay for it.
The cost of liquidity could be exacerbated in the next crisis: as Jamie Dimon (Chairman and CEO of JPMorgan Chase) has pointed out: “In a crisis, clients also draw down revolvers… As clients draw down revolvers, risk-weighted assets go up, as will the capital needed to support the revolver… Under the advanced Basel rules, we calculate that capital requirements can go up more than 15% because, in a crisis, assets are calculated to be even riskier. This certainly is very procyclical and would force banks to hoard capital.”
New Indicator to Predict Future Market Crashes
To gain a better understanding of why government bonds (also known as sovereign debt) are the only “fail-safe” solutions that an investor can utilize to protect their liquid assets, please see my May 2009 “Safe Haven” white paper.
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