The New CS Board

[jumanji0881]

Beginning of the End -
Larry Summers Pre-Empts Coming Crash, Says Market Feels Like 2007
https://www.zerohedge.com/markets/larry-summers-pre-empts-coming-crash-says-market-feels-2007

My Comment: The instability in the currency markets are the beginning of the end. The consequences of the past 35 years of Fed interventions which created one economic bubble after another are starting to be felt as things unravel globally. It's going to get a lot worse. The central banks have created a problem for which they have no solution.

Excerpts:
Besides the UK, “I don’t there’s any sign that I see -- yet -- of other markets being disorderly,” said Summers, a Havard University professor and paid contributor to Bloomberg Television. “But we know that when you have extreme volatility, that’s when these situations are more likely to arise.”

According to Summer, some of the dynamics behind the current fragility are substantial leverage, uncertainty about the economic policy outlook, unease about high rates of underlying inflation, volatility in commodities and geopolitical tensions tied to Russia’s Ukraine invasion and to China.

One particular area to monitor is the strains inherent in Japan’s policies right now, the former Treasury chief said, echoing what we said back in March (see "Yen At Risk Of "Explosive" Downward Spiral With Kuroda Trapped... And Why China May Soon Devalue")

Pointing out what our readers have known for much of the past year, Summers said that - like the BOE - on one hand, Japan has been withdrawing liquidity from its markets, through its purchases of yen last week in an effort to support the exchange rate. But on the other hand, it’s injecting liquidity through the Bank of Japan’s continuing monetary easing. It’s an “extraordinary thing” Summers said adding that “It will be interesting to see how that plays out." Japanese investors have “vast holdings” of fixed-income securities around the world, and that will be something to keep an eye on, he said.

Turning to the UK, Summers said that “we’re in very complex and uncharted territory,” warning that while the Bank of England’s intervention in the gilt market stabilized things for a time, that won't last, noting that the BOE’S plan is for operations to continue until Oct. 14. The key problem - according to the man who single-handedly redefined unsustainable economic policy - is that markets don’t believe UK macroeconomic policy is sustainable.

“It’s not going to stay stable forever on the basis of two weeks buying -- and it’s probably not even going to stay stable for two weeks, unless there is a sense that this is a bridge to the fundamentals being fixed,” Summers said of UK markets. “And that’s not what we are seeing from the indications we’re getting this morning.”