I have been quite bearish in these webpages lately. The coordinated central bank or investment company liquidity injection of November 30 has taken a Lehman-like event off the table. In the US, the Fed does QE3 in the 1H, which would send asset prices flying. In Europe, the ECB has already been engaged in a kind of QE though the back door using LTRO, which should cure banking balance bed sheets over time. The coordinated central loan provider actions of November 30 to inject liquidity into the global bank operating system shows that central bankers are worried.
Key Risk: The machine isn’t totally healed. These actions bought time for the politicians to do something just. Indeed, Bloomberg reported that Ben Bernanke, in a closed-door briefing to Republican senators, made it clear that there are limits to Fed policy and it generally does not plan to bail out European banks. In addition, Bank of Canada mind Mark Carney said within an unusually frank speech that the world is in a period of deleveraging. Debt tolerance has decisively converted. The at first well-founded optimism that launched the decades-long credit boom has given way to a belated pessimism that seeks to reverse it. Excesses of leverage are dangerous, partly because personal debt is a particularly inflexible form of funding.
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