'Rock steady, rock steady...' (part II)

                       



ECB warns on ‘unstable’ financial markets
By Gillian Tett in Davos



Conditions in global financial markets look potentially “unstable”, suggesting investors need to prepare for a “repricing” of some assets, Jean-Claude Trichet, president of the European Central Bank, said over the weekend in Davos.

The recent explosion of structured financial products and derivatives had made it more difficult for regulators and investors to judge current risks in the financial system, Mr Trichet said. “We are currently seeing elements in global financial markets which are not necessarily stable,” Mr Trichet said, pointing to the “low level of rates, spreads and risk premiums” as factors that could trigger a repricing.



“There is now such creativity of new and very sophisticated financial instruments ... that we don’t know fully where the risks are located.” He added: “We are trying to understand what is going on but it is a big, big challenge.”

Mr Trichet’s comments reflect a debate in policymaking circles about the implications of the growth in derivatives.

Many investment bankers and some regulators and economists argued at last week’s World Economic Forum in Davos that the growth of the $450,000bn (€350,000bn, £230,000bn) derivatives sector had helped reduce market volatility and made the system more resilient to shocks by spreading credit risk. But other officials fear these instruments may be raising leverage and risk-taking to dangerous levels and keeping the cost of borrowing artificially low, potentially increasing the chance of financial crises.

Senior policymakers admitted it had become hard to track the risks because the sector is opaque, much activity occurs in unregulated hedge funds, and products shift rapidly across markets and between the boundaries of national central banks.

Andrew Crockett, president of JP Morgan international, said: “These new instruments ought to make markets more complete. But there is a lack of transparency ... we don’t know how much leverage there is in hedge funds, for example.”

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Les taux d'interets bas et ses consequences...

"r(FED;2003-2004)" + "r(ECB;2003-2004)" =
∆ "Outsatnding credit default swap contracts, in trillions"

P.S. : Sauf si ∆Ms (∆Ms = Ms(t1) - Ms(t0) avec ∆Ms > 0) est retire du systeme monetaire "interne" (en se basant sur la logique des flux hydrauliques...i.e. une fuite..., n'est-ce pas 'Phillips'? ...p.ex. a travers des Fonds Hedge ?)...afin de reequilibrer ou bien pour pouvoir mieux controler I...




When 'Beverage' (IT-Bubble?) became 'Leverage' (Hedge Fund?)...

...cad. que P.-V. a la 'vague' impression que les E.-U. sont en train (...le hall d'entree du casino, avec tapis rouge, c'etait les taux d'interets a 1%...autrement dit, bien preparer ses appats...) de jouer a 'quitte' ou 'double'...et jusqu'a maintenant, ils ont toujours double et gagne...