Crisis??? Here she comes again (JP Morgan)

Looks like we are not learning and we are asking for a new re-fill, like it was a drink in some fast food restrant

you should raise your eyes and see what is forming on the horizon.

After several years of injectiva new money into the financial markets by the Central Banks, with the US Federal Reserve at the head of the pack and the ECB on the trail, the result is in sight, the bule is forming again, and everybody is lowering there eyes like in 2007

It is fair to say that this expansionary monetary policy prevented the Great Recession of the 21st Century from turning into a new Great Depression almost 80 years later. It is fair to say that the issuance of the equivalent of 14 trillion dollars in the United States, the Eurozone, the United Kingdom and Japan has decisively helped to stop the unemployment gallop and reverse the economy, as well as stabilize and recover most of the banks that were put at risk at the time of the fall of Lehman Brothers and others who only later revealed to be on the edge of the cliff.

Ten years after the big financial breakthrough of September 2008, it is time to take stock and a prudent exercise of memory.

No, the crisis in the markets did not start exactly in September 2008, it began in March 2007. In July of that year, then Finance Minister Teixeira dos Santos said he was not worried about subprime cases in the United States files of the Portuguese newspapers did not burn, they are alive to prove it). Now he says that in 2008 he was surprised by the fall of Lehman, the visible and explosive flame of a fire that for more than a year had undermined the bowels of the markets.

Let us then be clear, so that some time later there will be no more finance ministers in Portugal surprised by what is being formed on the horizon.

The head of the ECB's Supervisory Board, Danièle Nouy, said last week that the next crisis will be linked to the real estate market. And sooner or later a new financial crisis will happen.

The alert is not isolated, many leaders of the major international financial institutions have repeated warning statements about the impact of massive injection of money into globalized financial markets. The leading European and American stock market indices have reached historically unprecedented levels that everyone knows, including those who earn a lot in those markets, are unsustainable.

While only part of the massive injection of money into the financial circuits by central banks has reached the real economy, helping to reduce unemployment, much of that money has created bubbles of real estate speculation and is undermining the capacity of millions of workers, including the middle class , to pay decent housing near their places of work (a phenomenon aggravated by the increase in tourism flows, which at the same time helps local economies).

Not only real estate prices, but above all stock prices, bonds and other debt securities, are clearly overvalued. (Banking money lending to traditional goods and services production activities remains well below the levels of the beginning of the century, while the financial part of the economies swelled like a balloon, surpassing the volume pre-2007). correction is only a matter of time. There are those who risk saying, very little time.

In this scenario, what is discussed out there?

way are we divertido our eyes and not looking at the near future.....

For example, a statement is made in the last speech by the President of the Fed that on the road to the last two recessions, destabilizing excesses have come more on the side of financial markets than inflation, and that risk management must now look more beyond inflation to anticipate the signs of these excesses. Jay Powell added that inflation may no longer be the best indicator of the real progress of the labor market and the state of the economy.

Translation by Rana Foroohar, a columnist for the Financial Times: the president of the Fed is for the first time admitting that financialization (the excessive weight of finance) in the economy exists. That is, the risks of a new crisis may come more from the excesses of the financial markets than, on the contrary, the markets are hampered by the slowdown of the economic cycle as the models usually used by the central banks said. Rana Foroohar goes further and asks for a clear answer if anyone doubts that the mega-bubble currently in the markets may or may not burst.

However, within the Fed, there is a long discussion about whether or not major US banks should increase their capital reserves to deal with a possible crisis in the financial markets and maintain the level of credit to the economy. The presidente of the central banks of the states of Cleveland, Minneapolis and Boston, federal grassland, insists that yes and that the stress tests done recently to the banks are not enough to assure the clash of a new crisis.

Donald Kohn, a former vice president of the Federal Reserve, quoted by the Financial Times, says there are many signs of exuberance (overeating) in the markets, particularly in real estate, the level of new loans to heavily indebted companies and the prices of many assets : "We have to worry about the things that are not seen but that grow when times seem good and people are more complacent." Increasing the banks' capital cushion the countercycle makes them more resilient to bad times and contrary to the human tendency natural to project in the future what has been good in recent times. The Fed has many reasons to be cautious during the financial boom "and act now.

Jay Powell, the president of the Fed, remains determined to continue tightening monetary policy in the direction of raising interest rates, but hesitates to call for an increase in bank reserves.

The pressure of the Republican Party has been very strong in the opposite direction: Trump and the Republicans demand a new banking deregulation after the Obama-imposed imposition in the time (that is still to avoid the return to greater imprudences on the part of the great American bankers).

How long will the Bank's more restrictive banking laws and monetary policies keep up with Trump's advances, nobody knows. It is true that among US and European regulators and central bankers there is growing fear of a new financial crisis caused by real estate bubbles and stock prices, debt securities and other assets.

we are ready to repete the paste mistakes again

Rui Leite