BIS Issues An Alert: Tightening “Paradoxically” Leading To Excessive Risk Taking; Reminds What Happened Last Time

Valuations in asset markets are ‘frothy’ and investors are basking in the ‘light and warmth’ of the ‘Goldilocks economy’, believing that nothing can upset a future of ‘sustained growth and low interest rates’. We observe a heavy dose sarcasm from the media briefing coinciding with the Bank for International Settlements’ (BIS) latest quarterly review. Specifically, we wonder why is it always the BIS which warns its central bank members and investors about the risk of an approaching financial crisis…and why do most of them never listen. We’re not sure, but here we go again, with the BIS warning that conditions are similar to those before the crisis.
As The Guardian reports:
Investors are ignoring warning signs that financial markets could be overheating and consumer debts are rising to unsustainable levels, the global body for central banks has warned in its quarterly financial health check. The Bank for International Settlements (BIS) said the situation in the global economy was similar to the pre-2008 crash era when investors, seeking high returns, borrowed heavily to invest in risky assets, despite moves by central banks to tighten access to credit. The BIS was one of the few organisations to warn during 2006 and 2007 about the unstable levels of bank lending on risky assets such as the US subprime mortgages that eventually led to the Lehman Brothers crash and the financial crisis.

This post was published at Zero Hedge on Dec 4, 2017.

 

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