tag:blogger.com,1999:blog-5936637281134795592.post5521027961438495735..comments2024-03-08T08:55:52.985-08:00Comments on Whispers from the Edge of the Rainforest: Bank of England warns banks of risk of sharp global interest rate riseUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-5936637281134795592.post-86970823649086709502013-06-28T07:21:46.298-07:002013-06-28T07:21:46.298-07:00I haven't read the speech, but this was pointe...I haven't read the speech, but this was pointed out on page 3 of King's speech (I've emphasized in capitals):<br /><br />"The present extraordinary monetary policies cannot, however, continue indefinitely. Both nominal and real interest rates are at unsustainably low levels. There is an understandable yearning for a return to normality. And in recent weeks bond yields have risen – up around 45 basis points since the start of May. But such market moves should not be confused with a return to normality.<br /><br />A rapid return to higher interest rates would do great damage to the balance sheets of highly indebted households, companies and, especially, financial institutions. The challenge in returning to normality is not so much managing market expectations when that eventually happens, important though that is, but in creating the economic conditions in which it is sensible to return to more normal levels of interest rates. The real challenge – on a global scale – is to rebalance the world economy so that very low interest rates are not required to exhort deficit countries to spend in order to absorb the surpluses elsewhere.<br /><br />Monetary policy cannot provide the answer. It can only buy time to bring about the necessary structural changes in investment, trade and capital flows. WHETHER THEY INVOLVE CHANGES IN CURRENCY VALUES OR RESTRUCTURING OF DEBT IS A POLITICAL CHOICE, but a failure to deal with global imbalances will not only retard the recovery in the world as a whole, but worsen the scale of the adjustment ultimately needed. It will inevitably be a bumpy ride."<br /><br />http://www.bankofengland.co.uk/publications/Pages/speeches/2013/670.aspx<br /><br />The restructuring of debt is an interesting mention from a central banker, even if he is outgoing. I can see it being very pertinent to the Euro situation, but for a global scale... that's going to involve huge readjustments that could be huge debt restructures for the globe's indebted nations (and we know who they are, unfortunately).<br /><br />Unless you think China is really going to, as Michael Pettis thinks is necessary, switch to supporting their domestic consumption instead of investing at world-historic levels of production - and fairly soon in order to correct these imbalances without the alluded-to debt defaults occurring.not a feng shui expertnoreply@blogger.comtag:blogger.com,1999:blog-5936637281134795592.post-48476562169490114992013-06-27T04:06:07.812-07:002013-06-27T04:06:07.812-07:00China has issues as well...CAD we weaken even furt...China has issues as well...CAD we weaken even further...perhaps to 85 US cents. I'm happy for real estate prices going down (that grew 300% over past 8 years) but we all here in BC face a deep dive ahead...Anonymousnoreply@blogger.com