Reuters - European stocks are slated for another fall on Friday after Asian stocks slumped on growing fears the U.S. economy was sliding into recession and as some European lenders faced short-term funding strains, raising fears of a systemic banking crisis on the continent.
A minor adverse shock to financial markets can be propagated by liquidity strains, leading to a major crisis. This column suggests a novel measure to address systemic liquidity risk – a Macroprudential Liquidity Buffer, which would require financial institutions to hold systemically liquid assets in proportion to their liabilities less regulatory capital. This proportion varies positively with growth in system-wide funding needs, so the liquidity buffer increases when non-equity funding is growing.
The IMF 2009 country report on Canada discusses there current economic condition. As part of that they explore the success Canada had in regulating their banking sector (which stands in stark contract to the catastrophic regulatory failures in the USA and Europe). And also provide ample evidence of that wise regulation did indeed prevent the financial crisis.
This post Crisis — The Inevitable Result of Modern Central Banking appeared first on Daily Reckoning.
The inevitable effect of contemporary central banking is serial financial booms and busts. With that comes increasing levels of systemic financial instability and a growing dissipation of real economic resources in misallocations and malinvestment. The world ultimately becomes poorer.
TOKYO: Asian stocks and oil fell on Monday after Wall Street suffered another bruising blow as deepening concerns over the slowing Chinese economy continued to unnerve global equity markets. The safe-haven yen rallied and key government bonds were bought from the widespread unrest in the financial markets, set in motion nearly two weeks ago when China devalued its currency and generated fears about the state of its economy.
LONDON — Markets around the world fell for a second day on Wednesday, with stocks, the dollar and emerging market currencies all under pressure after China pushed the yuan lower again overnight, boosting the appeal of top-rated government bonds.
Germany’s 2-year yield fell to a fresh record low of -0.29 per cent as investors feared the deflationary pressures of a slowdown in China — which devalued its currency on Tuesday — would sap growth around the rest of the world.