Yesterday I outlined how the next Crash will play out. Today we’ll assess why this Crisis will be worse than the 2008 Crisis. By way of explanation, let’s consider how the current monetary system works…
The 2008 Crisis was not THE Crisis. The 2008 Crisis was largely a banking crisis focused on securities. The REAL Crisis will hit when the bond bubble collapses. The current global monetary system is based on debt. Governments issue sovereign bonds, which a select group of large banks and financial institutions (e.g. Primary Dealers in the US) buy/sell/ and control via auctions.
As the readers of this blog would know, I have been advocating more symmetric tax treatment of equity and debt, both in terms of public and private bonds and lending taxation. Here's a recent IMF paper on the topic that provides evidence that asymmetric taxation of debt and equity, with preferential treatment of debt over equity, generated internal instability in the system, making it more prone to crises.
OTTAWA — The risk of a major crisis in Canada’s financial system, and the impact of it would have on all aspects of our economy, doesn’t appear to be getting any bigger — but it’s not getting much better ether.
The Bank of Canada, in what it hails as “an enhanced framework” for gauging the stability of the banking sector, said Thursday that Canada remains robust but still faces “significant vulnerabilities.”
Japan may have its Abenomics, which is about reversing deflation and restarting growth using a shock and awe approach of qualitative and quantitative easing, simplified as a doubling its monetary base in a few short years, but that is old news. The latest -nomics is that of China and, as Barclays calls it, Li Keqiang's Likonomics which is about "about deceleration, deleveraging and improving growth quality."
- Irish banks vulnerable in stress tests: AIB/ BofI amongst worst 5 banks in EU- Ulster Bank's parent Royal Bank of Scotland emerged as 2nd worst bank- AIB, Banca MPS especially vulnerable & ‘failed’ in adverse scenario (see table)- Impairment of financial assets was the largest negative contributor to results
Ben Reitzes, an analyst at Barclays Capital, was bullish on Apple Inc. (AAPL) for more than a decade, but he now believes that the stock will be stuck in a trading range due to a mature smartphone market, and due to his belief that the company's new products will not be as revolutionary as some of its previous products were.
UK bank Barclays have been fined by US federal regulators with $453 million. RBC Capital Market, which is the investment branch of Royal Bank of Canada has appointed Darrell Uden for managing director. Chinese food producers are trying to restore customer’s confidence in their products. Google is launching a non-profit project in the UK that will give companies possibility to use free some of Google’s features like Adwords.