Fiercely critical of the record low interest rates and mass quantitative easing schemes, the BIS said even the world's overburdened central bank’s could not stop the credit cycle from unwinding.
Instead, measures to impose negative interest rates were creating huge distortions in global bond markets
Meanwhile emerging market debtors - who have embarked on a $3.3 trillion dollar denominated debt spree in the wake of the financial crisis - saw issuance ground to a halt in the second half of the year.
This provided a “telltale” sign that the financial conditions were reaching an inflection point, accompanied by large depreciations in emerging market currencies and slowing domestic growth....
Global debt now stands at over 200pc of GDP, exceeding levels seen before the financial crash in 2007.
Any turning in the credit cycle risks imperiling debtor companies and governments, raising the chances of default and corporate bankruptcies, said the BIS.
“If they persist, tighter global liquidity conditions may raise stability risks in some countries, especially those where other indicators already point to a heightened risk of financial stress”, they said
“The tension between the markets’ tranquillity and the underlying economic vulnerabilities had to be resolved at some point. In the recent quarter, we may have been witnessing the beginning of its resolution,” he added.
Consumer borrowing rose in January by the least since November 2013 as Americans’ outstanding credit-card debt dropped for the first time in nearly a year.
The $10.5 billion advance in total credit followed a revised $21.4 billion gain in the previous month, Federal Reserve figures showed Monday. Revolving debt, which includes credit cards, declined $1.1 billion, the first decrease since February 2015
....as consumers cut back on credit card use, the Federal Reserve reported Monday.
Overall consumer credit increased 3.6% in January, or by a seasonally adjusted annual rate of $10.5 billion. This is the smallest percentage increase since March 2013. It’s also a sharp deceleration from December’s 7.3%, or $21.4 billion, gain.
The slowdown brought consumer credit below expectations. Economists had been forecasting an increase of $16.5 in January.
The entire purpose of its unorthodox stimulus programs -- quantitative easing, negative interest rates -- is, in effect, to get prices wrong: to press down interest rates below where they would normally go and force banks to lend money in ways they normally wouldn’t. The BOJ, in other words, is trying to alter prices to change the incentive structure in the economy in order to engineer certain results -- to increase inflation, encourage investment and spark growth.
The problem is that the BOJ hasn’t achieved any of those objectives....
Inflation in January, by one commonly used measure, was a pathetic zero. Gross domestic product has contracted in two of the past three quarters.
According to generally accepted accounting principles, or GAAP, the most hated term on Wall Street, earnings have swooned in 2015. For example, for the S&P 500, earnings plunged 12.7% according to GAAP, even as Wall Street fed us the idea that they only fell 3.4%, based on its fantasy “adjusted” numbers.
With earnings down sharply, but with share prices down only a little, the resulting P/E ratios, despite the decline in stock prices, have soared, indicating just how expensive stocks are getting.
The trailing 12-month P/E ratio based on GAAP for the S&P 500 jumped to 23 as of March 4. That’s very high. Especially now that revenues and earnings are both heading south