Foreign lending by UK banks fell by a staggering $884bn, equal to 81% of the entire contraction in international lending.
London as the epicenter of Europe's structured credit industry, has suffered a dramatic collapse and facing a double blow since worldwide issuance of bonds and securities has also gone into freefall, plummeting 77% from over a trillion dollars to $247bn in the third quarter.
In its quarterly report, the BIS warned the US Federal Reserve, the Bank of England and other central banks that near-zero interest rates and emergency monetary stimulus may come at a cost.
By opening the cash spigot, the authorities risk displacing the money markets and may "discourage banks from lending to other banks".
The money markets are a crucial lubricant for the financial system, but they cannot function if rates fall too low. The sector can wither away, as Japan discovered during its "Lost Decade".
The BIS also hinted that the European Central Bank and Sweden's Riksbank may have blundered by raising rates this year to contain the oil shock. It said short-term energy spikes have no lasting effect on inflation or wage deals.
"Evidence suggests an absence of strong second-round effects on inflation. The temporary inflationary impulse will soon drop out," it said.
Related Posts :
Sources :
- Telegraph: BIS warns of collapse in global lending, December 9, 2008 8:53AM GMT
This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.
You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.
No comments:
Post a Comment