Deutsche Bank: "We've Created A Global Debt Monster" | Zero Hedge
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Googliano
Original
Two observations on the latest thoughts by Jim Reid (DB's best strategist by orders of magnitude):
He is far more concerned by what is going on in China than any of the other noise around the world. And rightfully so. As we first showed a few months ago, the money creation in China puts what all the other global central banks do to shame. Any slowdown in this credit creation and the wheels have no choice but to fall off, which also explains why even the tiniest default in this $9 trillion economy will be bailed out as it would risk an outright "flow" collapse.
The Fed came, saw, and after realizing the mess it created with tapering - which can never be priced in now that the market is terminally addicted to the Fed's liquidity injections - will soon do what we have said since the May 2013 "taper tantrum" would happen - untaper, and resume bailing out everyone.
Full note from Reid:
From all the stories that broke while I was away the most fascinating surely revolves around the Chinese Trust product that in the end wasn't allowed to be at the mercy of market forces. For me it’s a microcosm of the fragility still present in global financial markets that a $9.0 trillion dollar economy - that will be the biggest in the world within the time frame of most of our careers - struggles to allow a $500 million investment product to default without there being market antiestéticars of it igniting panic in financial markets. This has now been a theme for the best part of 10-15 years in global financial markets particularly in the developed world but more recently the EM world since the GFC. We've created a global debt monster that's now so big and so crucial to the workings of the financial system and economy that defaults have been increasingly minimised by uber aggressive policy responses. It’s arguably too late to change course now without huge consequences. This cycle perhaps started with very easy policy after the 97/98 EM crises thus kick starting the exponential rise in leverage across the globe. Since then we saw big corporates saved in the early 00s, financials towards the end of the decade and most recently Sovereigns bailed out. It’s been many, many years since free markets decided the fate of debt markets and bail-outs have generally had to get bigger and bigger.
This sounds negative but the reality is that for us it means that central banks have little option but to keep high levels of support for markets for as far as the eye can see and defaults will stay artificially low. As such we remain bullish for 2014. However it’s largely because we think the authorities are trapped for now rather than because the global financial system is healing rapidly. So as well as EM being very important for 2014, we continue to think the Fed taper pace is also very important. If the US economy was the only one in the world then maybe they could slowly taper without major consequences. However the world is fixated with US monetary policy and huge flows have traded off the back of QE and ZIRP so it does matter. We have suspicions that the Fed may have to be appreciative of the global beast they've helped create as the year progresses.
In other words: bullish... because the system will continue to collapse and need more bailouts. The Bizarro world Bernanke created truly is an exciting place.
He is far more concerned by what is going on in China than any of the other noise around the world. And rightfully so. As we first showed a few months ago, the money creation in China puts what all the other global central banks do to shame. Any slowdown in this credit creation and the wheels have no choice but to fall off, which also explains why even the tiniest default in this $9 trillion economy will be bailed out as it would risk an outright "flow" collapse.
The Fed came, saw, and after realizing the mess it created with tapering - which can never be priced in now that the market is terminally addicted to the Fed's liquidity injections - will soon do what we have said since the May 2013 "taper tantrum" would happen - untaper, and resume bailing out everyone.
Full note from Reid:
From all the stories that broke while I was away the most fascinating surely revolves around the Chinese Trust product that in the end wasn't allowed to be at the mercy of market forces. For me it’s a microcosm of the fragility still present in global financial markets that a $9.0 trillion dollar economy - that will be the biggest in the world within the time frame of most of our careers - struggles to allow a $500 million investment product to default without there being market antiestéticars of it igniting panic in financial markets. This has now been a theme for the best part of 10-15 years in global financial markets particularly in the developed world but more recently the EM world since the GFC. We've created a global debt monster that's now so big and so crucial to the workings of the financial system and economy that defaults have been increasingly minimised by uber aggressive policy responses. It’s arguably too late to change course now without huge consequences. This cycle perhaps started with very easy policy after the 97/98 EM crises thus kick starting the exponential rise in leverage across the globe. Since then we saw big corporates saved in the early 00s, financials towards the end of the decade and most recently Sovereigns bailed out. It’s been many, many years since free markets decided the fate of debt markets and bail-outs have generally had to get bigger and bigger.
This sounds negative but the reality is that for us it means that central banks have little option but to keep high levels of support for markets for as far as the eye can see and defaults will stay artificially low. As such we remain bullish for 2014. However it’s largely because we think the authorities are trapped for now rather than because the global financial system is healing rapidly. So as well as EM being very important for 2014, we continue to think the Fed taper pace is also very important. If the US economy was the only one in the world then maybe they could slowly taper without major consequences. However the world is fixated with US monetary policy and huge flows have traded off the back of QE and ZIRP so it does matter. We have suspicions that the Fed may have to be appreciative of the global beast they've helped create as the year progresses.
In other words: bullish... because the system will continue to collapse and need more bailouts. The Bizarro world Bernanke created truly is an exciting place.
Googliano
Dos observaciones sobre los últimos pensamientos de Jim Reid (mejor estratega del DB en varios órdenes de magnitud):
Él está mucho más preocupado por lo que está pasando en China que cualquiera de los otros ruidos en todo el mundo. Y con razón. Como se demostró primero hace unos meses, la creación de dinero en China pone lo que todos los otros bancos centrales del mundo hacen a la vergüenza.
Cualquier desaceleración en esta creación de crédito y las ruedas tienen más
remedio que caer, lo que también explica por qué incluso el más mínimo defecto en esta economía 9000000000000 dólar será rescatada, ya que correría el riesgo de un colapso absoluto "flujo".
La Fed llegó, vio y después de darse cuenta el desastre que ha creado con la reducción gradual - que nunca puede ser un precio en el momento que el mercado es un adicto terminal a las inyecciones de liquidez de la Fed - pronto hacer lo que hemos dicho desde el 05 2013 "rabieta taper" pasaría - taper un, y reanudar el rescate de todo el mundo.
Nota completa de Reid:
De todas las historias que se rompió mientras yo estaba lejos la más fascinante sin duda gira en torno al producto Fiduciario chino que al final no se le permitió estar a merced de las fuerzas del mercado. Para mí es un microcosmos de la fragilidad aún presente en financiera mundial mercados de que una economía de $ 9.0 billones de dólares - que será el más grande en el mundo en el plazo de la mayoría de nuestras carreras -. luchas para que un producto de inversión de $ 500 millones y por defecto sin que los temores del mercado de que encender el pánico en los mercados financieros este ahora ha sido un tema para la mejor parte de 10 a 15 años en los mercados financieros globales en particular en el mundo desarrollado, pero más recientemente el mundo EM ya que el GFC. Hemos creado un monstruo de la deuda global que ahora es tan grande y tan crucial para el funcionamiento del sistema financiero y la economía que los impagos se han minimizado cada vez más por las respuestas políticas súper agresivos. Podría decirse que es demasiado tarde para cambiar de rumbo ya sin grandes consecuencias. Este ciclo comenzó con la política quizá muy fácil después de los 97/98 crisis EM así impulso al inicio de la subida exponencial del apalancamiento a través del globo. Desde entonces hemos visto grandes corporaciones guardados en los primeros 00s, el sector financiero hacia el final de la década y más recientemente Soberanos rescatados. Hace muchos, muchos años desde que el libre mercado decida el destino de los mercados de deuda y los planes de rescate han tenido generalmente se hacen más grandes y más grandes.
Esto suena negativo, pero la realidad es que para nosotros esto significa que los bancos centrales tienen más opción que mantener un alto nivel de apoyo a los mercados de tan lejos como el ojo puede ver y por defecto se quedará artificialmente bajo. Así seguimos siendo alcista para 2014. Sin embargo, es en gran parte porque pensamos que las autoridades están atrapados por el momento y no porque el sistema financiero mundial se está recuperando rápidamente. Así que, así como EM es muy importante para el año 2014, seguimos pensando que el ritmo cono Fed también es muy importante. Si la economía de EE.UU. era el único en el mundo, entonces tal vez podrían estrechan poco a poco sin mayores consecuencias. Sin embargo, el mundo está obsesionado con la política monetaria de EE.UU. y enormes flujos han negociado la parte trasera de QE y ZIRP lo que sí importa. Tenemos la sospecha de que la Fed podría tener para ser reconocida por la bestia mundial han ayudado a crear el transcurso del año.
En otras palabras: alcista ... debido a que el sistema continuará a colapsar y necesitan más rescates. El Bizarro mundo Bernanke crea verdaderamente es un lugar emocionante.
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