Author Archives: Yves Smith

Ilargi: The Taper And The China Credit Power Struggle Squeeze

Yves here. We described the funding mismatch with Chinese wealth management products during the first liquidity crunch earlier in the year, but given that most readers aren’t familiar with these structures, it’s good to have another summary as to how they work and more discussion of why they pose a risk to the Chinese economy. They are troublingly similar to structured investment vehicles, which were one of the detonators of the credit crisis in the US and UK.

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Wolf Richter: What Happens Next, Now That The 10-year Treasury Yield Hit The Psycho-Sound Barrier Of 3%

Yves here. As Wolf describes, in our brave new work of super-low interest rates, the 10 year Treasury breaching 3% was regarded with fear and loathing by the officialdom. Now with the Fed’s reassurances that the Fed funds rate will remain at just about zero for the foreseeable future, the stock market has popped the Champagne. But will the impact of the withdrawal of support for bond prices impact stocks sooner than the current rally would have you believe?

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Goodbye Price Stability, Hello Exchange Rate Volatility

Yves here. This post makes a deceptively simple but important observation. Despite claims otherwise, central banks are giving top priority to interest rate stability, over that of other mandates they have been given explicitly, such as the health of the financial system, price stability, and full employment. This is further confirmation of the idea that central banks are desperate to keep asset prices aloft.

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