We had stated above that excessive monetary policies beyond a certain threshold will create market distortions and an ensuing financial crisis.
There are excessive money supplies that the money managers have nowhere to invest anymore and they are trying to lend relentlessly by calling up companies. This will definitely encourage high-risk lendings, create market distortions and increase defaults in the future.
Consequently, the collateralized loan obligations are also booming now as shown below. Does anyone still remember the collateralized debt obligations fiasco (Lehman Bros' mini-bonds collapse!). We all knew what happened in the end.
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