Compared with the 80-page illustrated report, Brian Nader's speech has only three paragraphs, which are concise and to the point: the risk appetite of all asset classes in the financial system has risen in an all-round way, raising the valuation; As risk appetite rises, the financial system becomes more fragile.
People who have a full stomach have an appetite, which is the grafting of English words in financial industry. Brian Nader's core meaning is that the high corporate debt causes the superposition of macroeconomic leverage, the stock market valuation is constantly pushed up and down, and any price rediscovery event may be systematically amplified, brewing a global financial system storm.
In the first half of this year, retail investors speculated on meme shares, hedge funds exploded and Huang Yanlin's family office exploded, which caused huge losses to the banking industry. In Brian Nader's three-part speech, they each occupied a paragraph, but the main body of the report did not mention it.
An important achievement of the G20 Summit held after the financial tsunami in 2008 was the establishment of the Global Financial Stability Board, chaired by the Bank for International Settlements. On this basis, countries have set up national committees chaired by the central bank and the Ministry of Finance to regularly report the stability analysis reports of the financial system.
The twice-yearly report of the Federal Reserve is an eight-part essay with a fixed format. It uses the model to make stress test charts from four aspects: market valuation, macro leverage ratio, lending level in the financial system and financing risk. Among them, the American stock market and bond market are the most striking.
By the end of 2020, the total market value of the US stock market was $46.922 trillion, and the valuation increased by 22% in 2020. During the same period 1997 to 2020, the average annual growth rate of US stock market value is only 9.2%.
The total market value of US Treasury bonds is US$ 20.946 trillion, rising by 26% in 2020. In the same period 1997 to 2020, the average annual growth rate of the market value of US Treasury bonds is only 8.3%.
The total debt of the financial system is 17.7 16 trillion USD, which will increase by 13.6% in 2020, and the average annual growth rate from 1997 to 2020 will be 4.7%.
These figures don't need to be published by the Federal Reserve, which is close to industry speculation, and only need to be confirmed by the "authoritative" Federal Reserve once. As soon as the report and speech came out, people in the industry immediately vomited.
At present, the biggest market contradiction is that while using the zero interest rate policy and the huge amount of 1.2 trillion per month to enter the market, the Fed releases water on a large scale, forcing funds to look for income, and at the same time worrying about the behavior of funds really looking for income and warning risks.
The contradiction of the Federal Reserve did not begin today. In the 1920s, the American economy rose, exports increased greatly, and the dollar appreciated. Accompanied by this, the British economy declined, exports dropped sharply, the trade deficit with the United States was huge, and the pound depreciated sharply.
In 20 17, for the sake of the stability of the British empire, the Bank of England turned to the Federal Reserve for help, demanding that the US dollar cut interest rates and maintain the peg mechanism between the British pound and the US dollar. When the American economy was overheated and the stock market was crazy, the Federal Reserve agreed to cut interest rates and hold pounds, which made the crazy stock market crazy for nearly two years.
The story behind it is well known. The stock market crash of 20 19 triggered the Great Depression for ten years, and World War II broke out. It can be said that the wrong monetary policy of the Federal Reserve is the financial source of the transition from free competition capitalism to post-war welfare capitalism.
Today's Fed is no better than it was then. Although they are most familiar with this "family history", the situation is urgent. The low interest rate policy reduces the expectation of default, allows the production sector of the economy to expand investment and maintain economic growth, which seems to be an important part of the performance appraisal of Fed officials.
There seems to be nothing more interesting than opening the floodgates to create a terrible flood and warning the tide makers of disaster.