Top Bankers: Too Much Central Bank Easing Is Becoming Dangerous

And the Stock Rally Is Due to Money-Printing

Everyone knows that “too big to fail” banks are bad for the economy. Indeed, even top bankers themselves say the big banks need to be broken up.

Now, top bankers are saying that the amount of liquidity which the central banks are flooding into the economy is becoming dangerous.

Agence France-Presse reports:

An influential group of leading world banks warned Thursday that central banks are pumping out too much easy money and markets risk becoming dangerously addicted to ultra-low interest rates.

The Institute of International Finance, which groups 450 banks, said that if central banks continue to flood money into the global economy, then any future bid to get it under control could itself destabilize the financial system.

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“These conditions — quantitative easing, very low interest rates — cannot last forever, but the risk is that financial markets have become addicted to them,” it warned.

“The longer central bank liquidity is relied on to hold things together, the more excesses and distortions are being accumulated in the financial system. An eventual unwinding of these excesses will become a destabilizing risk event.”

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IIF deputy managing director Hung Tran said that central bankers should be aware of “the unintended consequences of their actions” and make clear how they expect to adjust monetary policy over the long term.

“This would help lessen the risk of large swings in financial markets,” he said.

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US Federal Reserve chief Ben Bernanke last week downplayed worries that liquidity was fueling fresh bubbles in financial markets. But he added that the Fed — which has held its key rate near zero since the end of 2008 — was monitoring the situation.

The IIF is not some renegade group. Its board members include the top brass from many of the world’s biggest banks, including Goldman Sachs, Citigroup, Barclays, HSBC, Deutsche Bank, Société Générale, BNP Paribas, UBS, Credit Suisse, Morgan Stanley, Agricultural Bank of China, Industrial and Commercial Bank of China, Sumitomo Mitsui Financial Group, BNY Mellon, Bank of Tokyo-Mitsubishi UFJ, Commerzbank and Scotiabank,

As we noted in 2008, the problem was never liquidity. The problem is that the big banks became insolvent because of stupid gambling.

In other words, the government’s whole approach to the 2008 financial crisis was entirely wrong. And the easy money policy (quantitative easing) of central banks doesn’t help, but instead hurts the economy and the little guy.

Interestingly:

“Much of the recovery so far has… been heavily reliant on ‘easy money’ conditions fostered by central banks,” the IIF said in a statement,

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The IIF said the US Dow Jones Industrial Average’s had hit an all-time high this week more because of relaxed international monetary conditions than thanks to any recovery in the real economy.

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  • ddearborn

    Hmmmm
    Come on people this is totally bogus. The reason banks are suddenly trying to slam the brakes on “easing” to force precious prices down on the orders of the FED and their handlers. Banks continue to literally print money under easing and unless forced would never relinquish this cash cow. But now the FED is in a jam and the precious metals market has gotten so corrupt and so out of hand that it is threatening to bring them all down. So suddenly they are creating an environment that superficially justifies metals prices falling. The reality of course is given all that has transpired in the banking industry globally over the last 5 years gold should and will eventually be trading above $5000 an ounce. It is the intention of the FED banking syndicate and its controllers to institute a new world currency before that happens. And this is the only way to stop golds rise and the dollars fall.

    And it might interest people to know that it will probably take another world war for the bankers to win. So if the stuff hits the fan bear in mind that the real enemy is the controllers of the FED the Bank of England and the people controlling the 140 or so interlocking multi-naitonal corporations and banks that essentially control world commerce. (all the same bye the way) The cause will NOT be terrorism, it will not be a “rogue” dictator communism or any other ism. Any world war that starts will be because the ruling elite want it. It is a simple if inelequent method of covering the tracks of the greatest crime in world history. Namely stealing the wealth of the entire industrialized western world.

    Boys and girls the race has been on for some time. Joe six pack still hasn’t caught on to the fact that war is being waged by the elites against them. After all it is from the working class that the elites stole all the wealth. And it is the intention of the elites that the working class will fight and die in the next war. All Joe has to do to stop it is just say no thanks not today. A simple no just like the war on drugs.

 

 

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