1. Two serious warnings from the BIS ( the central bank of central banks) as they also warned ahead of the 2007 mortgage crisis and we know how that played out. ECB is already implementing it slowly as the real inflation rates are much higher by at least 4 % above official numbers the real negative interest rates are much steeper then the BIS claims ( which they know). Around the world even in countries which claim to have strong economies negative interest rates have been fabricated like in China or Turkey. Savers are robbed or forced to take stupid risks is the new reality around the world.
Banks Should Seek to Boost Capital Levels Before Basel Deadlines, BIS Says
BIS Says Central Banks Need to Start Increasing Rates to Contain Inflation
Central banks need to start raising interest rates to contain inflation and may have to act faster than in the past, the Bank for International Settlements said.
“Tighter global monetary policy is needed in order to contain inflation pressures and ward off financial stability risks,” the BIS said in its annual report published today in Basel, Switzerland. “Central banks may have to be prepared to raise policy rates at a faster pace than in previous tightening episodes.”
While policy makers in Asia and Latin America are already raising borrowing costs to damp price pressures, rates remain near record lows in the world’s largest developed economies. Central banks in the U.S., U.K. and Japan have signaled they intend to keep that stimulus in place for some time, with only the European Central Bank moving to gradually tighten credit as inflation risks increase.
“Global inflation pressures are rising rapidly as commodity prices soar and as the global recovery runs into capacity constraints,” said the BIS, which acts as a central bank for the world’s central banks. “These increased upside risks to inflation call for higher policy rates.”
Crude oil prices have gained 20 percent in the last 12 months, putting pressure on companies to pass on higher costs.
Negative Real Rates
BIS General Manager Jaime Caruana said global headline inflation has risen a percentage point to 3.6 percent since April 2010, while “real short-term interest rates have actually fallen in the past year, from minus 0.6 percent to minus 1.3 percent globally.”
“The world economy is growing at a historically respectable rate of around 4 percent,” Caruana said in a speech in Basel today. “The resurgence of demand has put concerns about deflation behind us. Accordingly, the need for continued extraordinary monetary accommodation has faded.”
The ECB in April raised its benchmark interest rate from a record low of 1 percent and has signaled another quarter-point step is likely in July.
By contrast, the Federal Reserve last week repeated a pledge to keep its policy rate close to zero for an “extended period,” and minutes from the Bank of England’s last policy meeting, at which the bank held its key rate at 0.5 percent, showed some officials see the potential for more monetary stimulus through further bond purchases. The Bank of Japan this month held its benchmark near zero and kept credit and asset- purchase programs in place.
Risk of Distortions
The BIS said that in “some advanced economies” policy tightening still needs to be balanced against the “vulnerabilities” associated with private and public sector balance-sheet adjustment and financial-sector fragility.
At the same time, “undue delay in the normalization of the monetary policy stance entails the risk of creating serious financial market distortions, the postponement of deleveraging and the misallocation of resources,” it said. Furthermore, a “timely tightening” of policy in both emerging-market and advanced economies will be needed “to preserve a low-inflation environment globally and reinforce central banks’ inflation- fighting credibility.”
The BIS said central banks should also reduce the size of their balance sheets, though it would be “dangerous” to cut them “too rapidly or too indiscriminately.”
In response to the financial crisis, the Fed and the Bank of England “sharply” increased their total assets from about 8 percent of gross domestic product to just below 20 percent, according to the BIS. The ECB expanded its assets from 13 percent of GDP to more than 20 percent. In emerging markets, central bank balance sheets “grew more gradually over the past decade,” the BIS said.
“Balance sheet policies have supported the global economy through a very difficult crisis,” it said. “However, the balance sheets are now exposed to greater risks — namely interest-rate risk, exchange-rate risk and credit risk — that could lead to financial losses.”
The BIS urged governments to pursue fiscal consolidation, saying the biggest risk is “doing too little too late rather than doing too much too soon.” In Europe, policy makers must fix the region’s debt crisis “once and for all,” it said.
“Nowhere is the link between fiscal sustainability and financial health more apparent than in parts of Europe today,” Caruana said. “There is no easy way out, no shortcut, no painless solution.”
The BIS also warned that a failure of the U.S. to tackle its budget deficit could become a source of instability, with potentially “far-reaching ramifications for the global economy” should a rapid depreciation of the dollar result.
“The current ability of the United States to easily finance its deficit cannot be taken for granted,” the report said.
The BIS holds currency reserves on behalf of its members and provides policy makers with a forum for discussion. Attendees at the annual general meeting in Basel today include ECB President Jean-Claude Trichet, Fed Chairman Ben S. Bernanke, Bank of Japan Governor Masaaki Shirakawa and Bundesbank President Jens Weidmann.
To contact the reporter on this story: Christian Vits in Basel at email@example.com
2. Too much of a coincidence that this guys died in an accident – well guess Mossad followed up on Stuxnet but tat will defintely stir up some serious consequences Hollywood would like to make a film off as KGB and China’s secret service or the Iranians will not be pleased with the situation.
Russian designers of Iran’s nuclear plant die in plane crash
DEBKAfile Exclusive Report June 23, 2011, 12:00 PM (GMT+02:00)
The three Russian nuclear scientists who planned, designed, built and put into operation Iran’s first nuclear reactor at Bushehr this year, died Tuesday night, June 20, when a Rusaero flight from Moscow to Petrozavodsk in northwest Russia crashed.
DEBKAfile’s sources reveal that they were among the 44 passengers who were killed.
Their loss is a severe blow to Russia’s atomic reactor industry as well as its nuclear program as a whole, since the three, Sergey Ryzhov, Gennady Banuyk and Nikolay Trunov, specialized in running installations in tandem and synchronizing various systems.
The Russian company OKB Gidropress, Moscow, which employed them as chief planners of nuclear plants, is proud of having sold reactors to five countries including Iran.
The authorities have ordered an investigation to find out why all three senior nuclear scientists were aboard the same airliner in violation of Russian security regulations which prohibit more than one high-ranking politician, military figure or executive of a sensitive industry taking the same flight.
The cause of the Tu-134’s crash is also being probed – although it has a notoriously high accident rate and should not have been used by the three scientists. The eight passengers who survived, who are in critical condition, are to be quizzed to find out what happened aboard the plane before it crashed.
The first assumption was that the disaster occurred due to human error. The three pilots missed the runway while landing at Petrozavodsk’s Nikolay Trunov airport because of heavy fog. It caught fire next to a highway.
This was the worst Russian aviation disaster since April 10, 2010, when a plane carrying the Polish president, his wife and many other Polish dignitaries crashed in similar circumstances near the city of Smolensk killing 97 people.
Our sources report that Iran chose to buy its first reactor from OKB Gidropress because the Russian firm bills itself as designers, builders, planners and operators of nuclear plants, specializing in adapting them to existing nuclear systems. For Tehran this capability was critical because the Bushehr reactor is composed of systems made in different countries, particularly Germany, and experts were needed for synchronizing them into a smoothly functioning plant.
DEBKAfile’s intelligence sources quote Iranian and Western intelligence officials as offering the opinion that the Bushehr reactor’s mixed components made it vulnerable to the Stuxnet malworm’s invasion of its control system two years ago. The three Russian scientists spent February and March 2011 at Bushehr after the Russian Nuclear Energy Commission insisted that the nuclear fuel rods be removed until they were sure the plant would not explode. The rods have since been reloaded and the reactor went online last month.
Wednesday, June 22, the OKB Gidropress Company Web site ran a black-bordered obituary mourning the deaths of Sergey Ryzhov, 52, Director General designer at OKB Gidropress, Gennady Banuyk, 65, Deputy Director and Chief Designer and Nikolay Trunov, 52, Chief Designer-Head of Division.