Dear,
This week the Federal Reserve decided to keep injecting liquidity in the Financial System by not changing its $85 billion a month bond-buying strategy.
http://www.reuters.com/article/2013/09/19/us-usa-fed-idUSBRE98G1D620130919
And the stock markets went up
http://www.reuters.com/article/2013/09/17/us-markets-stocks-idUSBRE9890IQ20130917
If the stock market prices were a fair representation of the economic health of the world, this would be great news.
Unfortunately, this is a purely speculative movement; injecting liquidity will never fix a solvency problem.
A Fractional Reserve banking system requires growth for being solvent, and we’re not going to grow, because scarcity of natural resources and global debt is making it impossible to grow at historical rates.
http://blogs.sap.com/banking/2011/12/07/its-growth-stupid/
And this is the real problem, lack of solvency in the Financial System. Federal Reserve is giving Red Bull bottles to a Financial System with a metastatic cancer. Maybe it looks like healthier, but at the same time the tumour is spreading.
The reality is that with limited growth, Capital becomes scarce, and no liquidity program can fix that.
As Mr. Jaime Caruana, General Manager of the Bank for International Settlements (Central Bank of the Central Banks) explained clearly some months ago, these stimulus programs are just borrowing time.
http://www.bis.org/speeches/sp130623.pdf
And we’re all going to pay a very high price for it; we are wasting funds that we’ll need in the future.
One month ago, William White, BIS’s former chief economist, gave another clear warning; “This looks like to me like 2007 all over again, but even worse,”
http://www.telegraph.co.uk/finance/10310598/BIS-veteran-says-global-credit-excess-worse-than-pre-Lehman.html
In fact, debt volume in the developed world is 30% higher today than on 2007.
http://www.economist.com/content/global_debt_clock
These debt levels are unsustainable, un-payable, and recognizing the fact will be the biggest bubble burst in the recent economic history.
Remember; financially, recognizing un-payable debts means writing them off. Trillions of dollars in assets will disappear, reducing dramatically the world’s Gross Domestic Product.
Abruptly, the global economic system will accept that we’re much poorer than we think we are.
But this was not meant to be a scary post, the day after the crash, sun will rise again, and we’ll wake up to live in a different world. At the time, it will be so clear that Capital is scarce that we’ll be ready to accept the only alternative; Efficient Capital Management.
The question is, what are we doing to be prepared for the systemic change?
Regulation is just part of the story, deregulation brought Capital waste, but a more stringent regulation is not enough for making the change happen.
Let me give you a simple example, governments can issue a law penalizing speeding, but if they don’t give radar speed guns to the police, speeding will not be prevented.
We’re not talking about plastic surgery here; we’re talking about changing the foundation of the financial system, from a business model based in volume to a business model based in efficient Capital management, a huge challenge indeed.
A holistic and integrated vision of Banks’ activities is mandatory, and in my opinion, SAP is the only software company with the vision and resources, for building the required technologic infrastructure.
But this capacity is useless if we don’t make it effective.
Some weeks ago, I talked to a friend who has had SAP Banking sales responsibilities for more than 10 years; he literally told me “Bank Analyzer is difficult to sell because we don’t have many people who really knows how it works”
This cannot be an excuse, we’re in the middle of a Systemic Change and we have to make it happen; whatever it takes.
Looking forward to read your opinions.
K. Regards,
Ferran.
This week the Federal Reserve decided to keep injecting liquidity in the Financial System by not changing its $85 billion a month bond-buying strategy.
http://www.reuters.com/article/2013/09/19/us-usa-fed-idUSBRE98G1D620130919
And the stock markets went up
http://www.reuters.com/article/2013/09/17/us-markets-stocks-idUSBRE9890IQ20130917
If the stock market prices were a fair representation of the economic health of the world, this would be great news.
Unfortunately, this is a purely speculative movement; injecting liquidity will never fix a solvency problem.
A Fractional Reserve banking system requires growth for being solvent, and we’re not going to grow, because scarcity of natural resources and global debt is making it impossible to grow at historical rates.
http://blogs.sap.com/banking/2011/12/07/its-growth-stupid/
And this is the real problem, lack of solvency in the Financial System. Federal Reserve is giving Red Bull bottles to a Financial System with a metastatic cancer. Maybe it looks like healthier, but at the same time the tumour is spreading.
The reality is that with limited growth, Capital becomes scarce, and no liquidity program can fix that.
As Mr. Jaime Caruana, General Manager of the Bank for International Settlements (Central Bank of the Central Banks) explained clearly some months ago, these stimulus programs are just borrowing time.
http://www.bis.org/speeches/sp130623.pdf
And we’re all going to pay a very high price for it; we are wasting funds that we’ll need in the future.
One month ago, William White, BIS’s former chief economist, gave another clear warning; “This looks like to me like 2007 all over again, but even worse,”
http://www.telegraph.co.uk/finance/10310598/BIS-veteran-says-global-credit-excess-worse-than-pre-Lehman.html
In fact, debt volume in the developed world is 30% higher today than on 2007.
http://www.economist.com/content/global_debt_clock
These debt levels are unsustainable, un-payable, and recognizing the fact will be the biggest bubble burst in the recent economic history.
Remember; financially, recognizing un-payable debts means writing them off. Trillions of dollars in assets will disappear, reducing dramatically the world’s Gross Domestic Product.
Abruptly, the global economic system will accept that we’re much poorer than we think we are.
But this was not meant to be a scary post, the day after the crash, sun will rise again, and we’ll wake up to live in a different world. At the time, it will be so clear that Capital is scarce that we’ll be ready to accept the only alternative; Efficient Capital Management.
The question is, what are we doing to be prepared for the systemic change?
Regulation is just part of the story, deregulation brought Capital waste, but a more stringent regulation is not enough for making the change happen.
Let me give you a simple example, governments can issue a law penalizing speeding, but if they don’t give radar speed guns to the police, speeding will not be prevented.
We’re not talking about plastic surgery here; we’re talking about changing the foundation of the financial system, from a business model based in volume to a business model based in efficient Capital management, a huge challenge indeed.
A holistic and integrated vision of Banks’ activities is mandatory, and in my opinion, SAP is the only software company with the vision and resources, for building the required technologic infrastructure.
But this capacity is useless if we don’t make it effective.
Some weeks ago, I talked to a friend who has had SAP Banking sales responsibilities for more than 10 years; he literally told me “Bank Analyzer is difficult to sell because we don’t have many people who really knows how it works”
This cannot be an excuse, we’re in the middle of a Systemic Change and we have to make it happen; whatever it takes.
Looking forward to read your opinions.
K. Regards,
Ferran.
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