{"id":70042,"date":"2013-09-16T20:22:58","date_gmt":"2013-09-16T19:22:58","guid":{"rendered":"http:\/\/rinf.com\/alt-news\/breaking-news\/global-credit-excess-is-worse-than-before-the-2008-crash\/70042\/"},"modified":"2013-09-16T20:35:58","modified_gmt":"2013-09-16T19:35:58","slug":"global-credit-excess-is-worse-than-before-the-2008-crash","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/latest-news\/global-credit-excess-is-worse-than-before-the-2008-crash\/","title":{"rendered":"Global Credit Excess Is WORSE than Before the 2008 Crash"},"content":{"rendered":"
The BIS said in its quarterly review that the issuance of subordinated debt \u2013 which leaves lenders exposed to bigger losses if things go wrong \u2013 has jumped more than threefold over the last year<\/strong> to $52bn in Europe, and jumped tenfold to $22bn in the US.<\/div>\n
\n

The share of \u201cleveraged loans\u201d used by the weakest borrowers in the syndicated loan market has jumped to an all-time high<\/strong> of 45pc, ten percentage points higher than the pre-crisis peak in 2007-2008<\/strong>.<\/p>\n

Share of high risk leveraged loans now greater than 2007<\/h3>\n

The BIS said investors are snapping up \u201ccovenant-lite\u201d loans that offer little protection to creditors, as well as a form of hybrid capital for banks known as CoCos (contingent convertible capital instruments) that switch debt into equity if bank capital ratios fall too low. While CoCos help shield taxpayers from losses in a banking crisis by leaving private creditors with more of the risk, the recent appetite for such an instrument is also a warning sign.<\/p>\n

The BIS said interbank credit to emerging markets has reached the \u201chighest level on record<\/strong>\u201d while the value of bonds issued in off-shore centres by private companies from China, Brazil and other developing nations exceeds total issuance by firms from rich economies for the first time, underscoring the sheer size of the debt build-up in Asia, Latin Africa, and the Mid-East.<\/p>\n

Claudio Borio, the BIS research chief, said the ructions in emerging markets since the Fed turned hawkish in May is a warning to investors that they must tread with care. \u201cGlobal financial markets have reacted very strongly. If there were any doubts about the strength of international policy spillovers, they have now been put to rest,\u201d he said.<\/p>\n

How Bernanke signal has pushed up long term rates<\/h3>\n

\"\"<\/p>\n

Mr Borio said nobody knows how far global borrowing costs will rise as the Fed tightens or \u201chow disorderly the process might be\u201d.<\/strong><\/p>\n

\u201cThe challenge is to be prepared. This means being prudent, limiting leverage, and avoiding the temptation of believing that the market will remain liquid under stress, the illusion of liquidity,\u201d he said.<\/p>\n

***<\/p>\n

Mr White said the five years since Lehman have largely been wasted, leaving a global system that is even more unbalanced<\/strong>, and may be running out of lifelines. \u201cThe ultimate driver for the whole world is the US interest rate and as this goes up there will be fall-out for everybody. The trigger could be Fed tapering but there are a lot of things that can go wrong. I very am worried that Abenomics could go awry in Japan, and Europe remains exceedingly vulnerable to outside shocks.\u201d<\/p>\n

Mr White said the world has become addicted to easy money<\/strong>, with rates falling ever lower with each cycle and each crisis. There is little ammunition left if the system buckles again. \u201cI don’t know what they will do: Abenomics for the world I suppose, but this is the last refuge of the scoundrel,\u201d he said.<\/p>\n

The BIS quietly scolded Bank of England Governor Mark Carney and his eurozone counterpart Mario Draghi, saying the attempt to use \u201cforward guidance\u201d to hold down long-term rates by rhetoric alone had essentially failed. \u201cThere are limits as to how far good communications can steer markets. Those limits have become all too apparent,\u201d said Mr Borio.<\/p>\n<\/div>\n

Copyright: Global Research<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The BIS said in its quarterly review that the issuance of subordinated debt \u2013 which leaves lenders exposed to bigger losses if things go wrong \u2013 has jumped more than threefold over the last year to $52bn in Europe, and jumped tenfold to $22bn in the US. The share of \u201cleveraged loans\u201d used by the […]<\/p>\n","protected":false},"author":1,"featured_media":70043,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[487,18],"tags":[],"class_list":{"0":"post-70042","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-breaking-news","8":"category-latest-news"},"_links":{"self":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/70042","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/comments?post=70042"}],"version-history":[{"count":0,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/70042\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media\/70043"}],"wp:attachment":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media?parent=70042"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/categories?post=70042"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/tags?post=70042"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}