From Yahoo Finance
Central Bank Analysts Say Stocks Are In 'Euphoric' Territory And We're Screwed When The Recession Hits
Business Insider By Jim Edwards
June 30, 2014
The Bank for International Settlements — the Swiss-based financial institution that acts as a counterparty to national central banks — has declared that stock markets are in a "euphoric" state and has urged central banks globally to begin tightening interest-rate policies now while economies are growing rather than wait for another recession, when it will be too late.
Those are scary words coming from a set of economists whose job it is to monitor how capable central banks are of responding to economic conditions with flexible monetary policy.
The subtext (and not so subtext) of BIS's annual report is that, because many central banks have reduced interest rates to zero — the U.S. and Japan included — they are without weapons to boost the economy should another crisis hit. You can't go lower than zero, basically.
These words from the BIS ought to terrify anyone who thought central banks were unprepared for the last recession in 2007, when U.S. interest rates were "high" at about 5.3%:
Financial markets are euphoric, but progress in strengthening banks’ balance sheets has been uneven and private debt keeps growing. Macroeconomic policy has little room for manoeuvre to deal with any untoward surprises that might be sprung, including a normal recession.
And that crisis looks set to arrive any day now because stocks are at a peak. Bloomberg underlined the point at the weekend:
One thing making people nervous about stocks these days is the fact the U.S. market has gone more than two years without a correction, or a 10 percent drop.
It just doesn’t feel right. Sort of like going two years without changing a car’s oil, or two days without brushing your teeth, or two paragraphs into a column without a good metaphor.
The last major dip for the Standard & Poor’s 500 Index (SPX) was an 11 percent drop from its intraday high on April 2, 2012, through its low on June 4, 2012. This year, the closest it’s come was a 6.1 percent slide from the middle of January to early February and a 4.4 percent decline in April.
On top of that, the M&A market hit new records this year. The Financial Times reports:
Read more from Yahoo Finance >>
Central Bank Analysts Say Stocks Are In 'Euphoric' Territory And We're Screwed When The Recession Hits
Business Insider By Jim Edwards
June 30, 2014
The Bank for International Settlements — the Swiss-based financial institution that acts as a counterparty to national central banks — has declared that stock markets are in a "euphoric" state and has urged central banks globally to begin tightening interest-rate policies now while economies are growing rather than wait for another recession, when it will be too late.
Those are scary words coming from a set of economists whose job it is to monitor how capable central banks are of responding to economic conditions with flexible monetary policy.
The subtext (and not so subtext) of BIS's annual report is that, because many central banks have reduced interest rates to zero — the U.S. and Japan included — they are without weapons to boost the economy should another crisis hit. You can't go lower than zero, basically.
These words from the BIS ought to terrify anyone who thought central banks were unprepared for the last recession in 2007, when U.S. interest rates were "high" at about 5.3%:
Financial markets are euphoric, but progress in strengthening banks’ balance sheets has been uneven and private debt keeps growing. Macroeconomic policy has little room for manoeuvre to deal with any untoward surprises that might be sprung, including a normal recession.
And that crisis looks set to arrive any day now because stocks are at a peak. Bloomberg underlined the point at the weekend:
One thing making people nervous about stocks these days is the fact the U.S. market has gone more than two years without a correction, or a 10 percent drop.
It just doesn’t feel right. Sort of like going two years without changing a car’s oil, or two days without brushing your teeth, or two paragraphs into a column without a good metaphor.
The last major dip for the Standard & Poor’s 500 Index (SPX) was an 11 percent drop from its intraday high on April 2, 2012, through its low on June 4, 2012. This year, the closest it’s come was a 6.1 percent slide from the middle of January to early February and a 4.4 percent decline in April.
On top of that, the M&A market hit new records this year. The Financial Times reports:
Read more from Yahoo Finance >>
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