Even The BIS Is Shocked At How Broken Markets Have Become

Tyler Durden's picture

Not a quarter passes without the Bank of International Settlements (BIS) aka central banks' central bank (also the locus of some of the most aggressive manipulation of gold and FX in human history) reiterating a dire warning about the fire and brimstone that is about to be unleashed upon the global economy.

It started in June of 2013, when Jaime Caruana, certainly the most prominent doom and gloomer at the BIS (who also was Governor of the Bank of Spain from 2000 to 2007 when this happened) asked if "central banks [can] now really do “whatever it takes”? As each day goes by, it seems less and less likely... [seven] years have passed since the eruption of the global financial crisis, yet robust, self-sustaining, well balanced growth still eludes the global economy.... low-interest policies have made it easy for the private sector to postpone deleveraging, easy for the government to finance deficits, and easy for the authorities to delay needed reforms in the real economy and in the financial system. Overindebtedness is one of the major barriers on the path to growth after a financial crisis. Borrowing more year after year is not the cure...in some places it may be difficult to avoid an overall reduction in accommodation because some policies have clearly hit their limits."

The BIS' preaching did not end there, and hit a new crescendo in June of 2014, when in its 84th Annual Report, the BIS slammed "Market Euphoria", and found a "Puzzling Disconnect" between the economy and the market":

"it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally", that "despite the euphoria in financial markets, investment remains weak. Instead of adding to productive capacity, large firms prefer to buy back shares or engage in mergers and acquisitions" and that "the temptation to go for shortcuts is simply too strong, even if these shortcuts lead nowhere"...   "Particularly for countries in the late stages of financial booms, the trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on."


"The global economy continues to face serious challenges. Despite a pickup in growth, it has not shaken off its dependence on monetary stimulus. Monetary policy is still struggling to normalise after so many years of extraordinary accommodation.  Despite the euphoria in financial markets, investment remains weak. Instead of adding to productive capacity, large firms prefer to buy back shares or engage in mergers and acquisitions. And despite lacklustre long-term growth prospects, debt continues to rise. There is even talk of secular stagnation.


Financial markets are euphoric, but progress in strengthening banks’ balance sheets has been uneven and private debt keeps growing.

It did not end there either. In September of 2014, the warnings continued:

... the search for yield – a dominant  theme in financial markets since mid-2012 – returned in full force. Volatility fell back to exceptional lows across virtually all asset classes, and risk premia remained  compressed. By fostering risk-taking and the search for yield, accommodative monetary policies thus continued to support elevated asset price valuations and  exceptionally subdued volatility.


The spell of market volatility proved to be short-lived and financial markets resumed their rally soon afterwards. By early September, global equity markets had recouped their losses and credit risk spreads once again consolidated at close to historical lows. While geopolitical worries kept weighing on financial market developments, these were ultimately superseded by the anticipation of further monetary policy accommodation in the euro area, providing support for asset prices.

The warnings continued.  Earlier today, the BIS released its latest Quarterly Review report, where the most prominent warning this time revolves around the inverse Plaza Accord surge in the US Dollar whose dramatic, concentrated surge in recent months is unparalleled in history. In a nutshell, in "Currency movements drive reserve composition", BIS' McCauley and Chan warn that, in Ambrose Evans-Pritchard's words, "off-shore lending in US dollars has soared to $9 trillion and poses a growing risk to both emerging markets and the world's financial stability."

From the full report:

The appreciation of the dollar against the backdrop of divergent monetary policies may, if persistent, have a profound impact on the global economy, in particular on EMEs. For example, it may expose financial vulnerabilities as many firms in emerging markets have large US dollar-denominated liabilities. A continued depreciation of the domestic currency against the dollar could reduce the creditworthiness of many firms, potentially inducing a tightening of  financial conditions.

Or it may not: because this is essentially a carbon copy of the warnings that were issued after Bernanke first hinted at tapering in May of 2013, leading to the Taper TantrumTM, which led to some short-term volatility which were promptly soothed by even more central bank liquidity flooding what's left of the capital "markets."

AEP has more:

A chunk of China's borrowing is disguised as intra-firm financing. This replicates practices by German industrial companies in the 1920s, which hid their real level of exposure as the 1929 debt trauma was building up. "To the extent that these flows are driven by financial operations rather than real activities, they could give rise to financial stability concerns," said the BIS in its quarterly report.


"More than a quantum of fragility underlies the current elevated mood in financial markets," it warned. Officials are disturbed by the "risk-on, risk-off, flip-flopping" by investors. Some of the violent moves lately go beyond stress seen in earlier crises, a sign that markets may be dangerously stretched and that many fund managers do not really believe their own Goldilocks narrative.


"Mid-October’s extreme intraday price movements underscore how sensitive markets have become to even small surprises. On 15 October, the yield on 10-year US Treasury bonds fell almost 37 basis points, more than the drop on 15 September 2008 when Lehman Brothers filed for bankruptcy."


"These fluctuations were large relative to actual economic and policy surprises, as the only notable negative piece of news that day was the release of somewhat weaker than expected retail sales data for the US one hour before the event," it said.


The BIS said 55pc of collateralised debt obligations (CDOs) now being issued are based on leveraged loans, an "unprecedented level". This raises eyebrows because CDOs were pivotal in the 2008 crash.


"Activity in the leveraged loan markets even surpassed the levels recorded before the crisis: average quarterly announcements during the year to end-September 2014 were $250bn," it said.


BIS officials are worried that tightening by the US Federal Reserve will transmit a credit shock through East Asia and the emerging world, both by raising the cost of borrowing and by pushing up the dollar.

But it's best to leave it to the BIS itself, where this time Claudio Borio picks up the torch left by Jaime Caruana. What is notable is that none other than the BIS slams the infamous, and now legendary intervention by James "QE4" Bullard to assure the S&P's levitation continues without a hitch!

To my mind, these events underline the fragility - dare I say growing fragility? - hidden beneath the markets' buoyancy. Small pieces of news can generate outsize effects. This, in turn, can amplify mood swings. And it would be imprudent to ignore that markets did not fully stabilise by themselves. Once again, on the heels of the turbulence, major central banks made soothing statements, suggesting that they might delay normalisation in light of evolving macroeconomic conditions. Recent events, if anything, have highlighted once more the degree to which markets are relying on central banks: the markets' buoyancy hinges on central banks' every word and deed.

Wait, so the central banks' central bank is openly chastising one of its own now and for what: for stabilizing the market and preserving the unstable euphoria that the BIS has been warning about for so long?

Does this mean that the BIS is now openly calling for a crash? Perhaps, what is clear is that even the BIS, or the "good cop" (if only for the middle-class, certainly bad cop for the 0.01%-ers) is now shocked by just how broken the markets have become as summarized in the following line:

The highly abnormal is becoming uncomfortably normal. Central banks and markets have been pushing benchmark sovereign yields to extraordinary lows - unimaginable just a few years back. Three-year government bond yields are well below zero in Germany, around zero in Japan and below 1 per cent in the United States. Moreover, estimates of term premia are pointing south again, with some evolving firmly in negative territory. And as all this is happening, global growth - in inflation-adjusted terms - is close to historical averages. There is something vaguely troubling when the unthinkable becomes routine.


So yes, thank you for confirming - years after most who still follow the farce that is the "market" with an open mind - just how absolutely broken it is thanks to central bankers.

And here is the rub, because for the BIS to be complaining about broken markets is nothing short of peak hypocrisy.

Why? Exhibit A: the BIS board of directors.

So, dear BIS thinkers, philosophers, and commentators: the next time you wish to warn the general public about how fucked up everything has become, maybe you can throw some of these "rational" ideas around your next Board meeting first and ask the economist sociopaths who are sitting on the CTRL-P buttons at printing presses around the globe to maybe take it a little easier with the wholesale, worldwide destruction of not only fiat currency but every single "market".

Oh, and while you are at it, please tell Benoit Gilson to slam paper gold to triple (and, if possible, double) digits ASAP: unlike the world's chasers of momentum who only buy an asset if it becomes more expensive on hopes greater fools will buy it back from them, there are those who actually know a good deal that won't last when they see it.

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Fun Facts's picture

"The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.” – David Rockefeller, Memoirs

RyeWhiskey's picture

The plebs get iPhone apps to waste their lives.

Headbanger's picture

Central banksters don't give a flying fucking shit what the BIS says

Cause they're all wildly high as hell believing they're Masters of the Universe

And making personal fortunes on their Ponzi schemes.

Squid-puppets a-go-go's picture

there should be a big blue highlight on Janet Yellens name in that list, too

outamyeffinway's picture

When bankers from the BIS and IMf start getting "suicided", maybe then we'll get monetary reform. To act as if the BIS and IMF are "concerned" entities about poor economic policy put forth by nations is laughable. I truly hope the world's citizens hold these bankers accountalbe at the Hague. Or on the street, lamp pole style. This isn't a new game. It's old. And stale.

Ghordius's picture

have you forgotten how DSK was arrested in NY with that hotel maid claiming rape? at the time DSK was the IMF head and the favourite in the French presidential race

we will get monetary reform as soon as the mightiest nation of this world puts it's political will to it. not before. until then, the US Congress will continue to vote against all IMF reform, for example

eclectic syncretist's picture

Collective immurement would be a just way to get rid of them, as it would do to them what they attempt to do to everyone else, only more effectively.

noben's picture
noben (not verified) RyeWhiskey Dec 8, 2014 10:47 AM

How's that Trickle Down thingy working out for you Reaganites and Thatcherites?

Got Recovery?

essence's picture

"The powers of financial capitalism had [a] far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert by secret agreements arrived at in frequent private meetings and conferences."
  -- Quote from Caroll Quigley's Tragedy and Hope, Chapter 20



New York City Mayor (1918-25) John F. Hylan

"The real menace of our Republic is the invisible government which like a giant octopus sprawls its slimy legs over our cities states and nation.
At the head is a small group of banking houses generally referred to as 'international bankers.' This little coterie... run our government for
their own selfish ends. It operates under cover of a self-created
screen...[and] seizes...our executive officers... legislative bodies...
schools... courts... newspapers and every agency created for the public protection."


A 2007 Swiss study at the Federal Institute of Technology concluded that there were 147 corporations that controlled 20% of world trade. These corporations shared Board of Director members. They included the Too Big To Fail Banks, the top insurance companies, major Oil Companies,Big Pharma, Monsanto and other major enterprises



This is who the BIS represents.


Every two months the minions of the criminal cartel meet to discuss implementing strategy as dictated by the real bosses (who take great pains to remain anonymous)

Bimonthly meetings

The two principal bimonthly meetings are the Global Economy Meeting and the All Governors' Meeting.

Sixty central banks and monetary authorities are currently members of the BIS and have rights of voting and representation at General Meetings:

Bank of Algeria
Central Bank of Argentina
Reserve Bank of Australia
Central Bank of the Republic of Austria
National Bank of Belgium
Central Bank of Bosnia and Herzegovina
Central Bank of Brazil   *******************************
Bulgarian National Bank
Bank of Canada
Central Bank of Chile
People's Bank of China   *************************
Bank of the Republic (Colombia)
Croatian National Bank
Czech National Bank
Danmarks Nationalbank (Denmark)
Bank of Estonia
European Central Bank   ***********
Bank of Finland
Bank of France
Deutsche Bundesbank (Germany)
Bank of Greece
Hong Kong Monetary Authority
Magyar Nemzeti Bank (Hungary)
Central Bank of Iceland
Reserve Bank of India ***********
Bank Indonesia
Central Bank of Ireland
Bank of Israel
Bank of Italy
Bank of Japan  ********
Bank of Korea
Bank of Latvia
Bank of Lithuania
Central Bank of Luxembourg
National Bank of the Republic of Macedonia
Central Bank of Malaysia
Bank of Mexico
Netherlands Bank
Reserve Bank of New Zealand
Central Bank of Norway
Central Reserve Bank of Peru
Bangko Sentral ng Pilipinas (Philippines)
National Bank of Poland
Bank of Portugal
National Bank of Romania
Central Bank of the Russian Federation  *********
Saudi Arabian Monetary Agency
National Bank of Serbia
Monetary Authority of Singapore
National Bank of Slovakia
Bank of Slovenia
South African Reserve Bank
Bank of Spain
Sveriges Riksbank (Sweden)
Swiss National Bank
Bank of Thailand
Central Bank of the Republic of Turkey
Central Bank of the United Arab Emirates
Bank of England   ***********
Board of Governors of the Federal Reserve System (United States) *****

ZH Snob's picture

seems the BIS is trying desparately to distance themselves from the very cluster-fuck of their own creation.  not one of the worlds central banks acts without their guidance and approval.

Ghordius's picture

if you see them as the "central bank of central banks", then this view might arise spontanuosly. but are they that? is the UN, for example, the "nation of nations"?

imo this kind of view betrays a hierarchical mindset, which distorts a factual vision of how the world really works

the BIS is more the "discreet henchman", or the "dutiful agent" of the central banks (and only 60 of them). it does nothing without permission of at least two of them

beavertails's picture

We didn't build ahem (cough) Print (cough) THAT!

THE DORK OF CORK's picture

I have a little theory

The us / fed represents CONTROL &  the EU / ECB / BIS represents KAOS.

Venice / London sits between this double act.

But both sides represent evil.

Peter Pan's picture

BIS is just another terrorist irganization. Perhaps its new name should be BISIS.

indygo55's picture

Thats it in a nutshell. David Rockefeller is pissed that this whole NWO thing ain't working out so well. Thanks to the freedom of the internet we (too many to hide now) are waking up. 

insanelysane's picture

The fix is simple.  Just need the FED and their friends to set up new "corporations" that aren't listed on any indices.  These corporations can issue stock.  The FED can print money and buy the stock of these new corporations.  Stock market indices stay flat and banksta buddies make cash.

Random_Robert's picture

What, you mean like Maiden Lane I and Maiden Lane II....?

Welcome back to 2008-2009  

The US and European Central Banks create, on average, 5-10 new "private corporations" per year. Most of these are classified as Fiduciary Funds (aka: Trusts), registered as LLC's (or equity issuing C-Corps) and are devoid of any personal or individual accountablity...



Black Forest's picture


Initially, I read your headline as "Even The IS Is Shocked At How Broken Markets Have Become"

and deeply apologize for that annoying misreading.

wendigo's picture
wendigo (not verified) Black Forest Dec 8, 2014 7:53 AM

I don't think the Islamic State thinks much about the markets. 

Shitgum Suicide's picture
Shitgum Suicide (not verified) wendigo Dec 8, 2014 9:25 AM

They do when it comes to the price of oil to fund themselves.

noben's picture
noben (not verified) wendigo Dec 8, 2014 10:55 AM

It's the other "I" state.

THE DORK OF CORK's picture

This is simple

Investment increases costs

Without additional credit this "investment' cannot be used.

This is most clearly seen in Europe with massive capital goods consumption and little end use consumption


In such a situation people are better of returning to the village / agrarian life as although they will have little to no credit at least they have independence from industrial costs.


viedoklis_lv's picture

Putin regime propoganda asset doesn't even hide any more it's ruskie origin. I'm talking about article picture.

Pareto's picture

As always - and I try - still don't know what you're talking about.

Winston Churchill's picture

Its like listening to a true schizophrenic, with multiple personalities arguing with themselves.

Maybe all the ism's are really mental illness.

Long rubber rooms.

rejected's picture

You could easily make a swastica with two of those pics to repesent the millions of Soviets that died fighting the monster Nazism only to have the victors fund and nourish them again in Ukraine.

Here in the u.s.s.a we don't even remember Pearl Harbor any longer. It's insulting to those nations that attacked us.

Yep, We've come a long way baby...

buzzsaw99's picture

just moar bis-cyoa-bs. the bis knows damn well the fed will never tighten in a meaningful lasting way. hell draghi and dudley are on the board.

Alberich's picture

Q. How much fragility underlies the current elevated mood in financial markets?

A. More than a quantum.

Thanks for clearing that up, BISes.

THE DORK OF CORK's picture

Europe's all cars / no wine economy can be explained very simply.


Its perhaps the greatest bank concentration ( camp) experiment ever devised.


Ask yourself why allmostt all inputs unto Europe go into long distance distribution?...........

When wine consumption in post war France / Italy was 3 4 and sometimes 5 times above present levels

The local wines were made for local consumption.

To be competitive is a scarce money banking scam where you must export tour wealth for tokens,

That is not free trade people.

Disc Jockey's picture

Fuck the BIS. Those MFers bankrolled that nut Hitler making his "German Miracle" possible through a massive flow of cash into many companies with Fascist contracts in the Nazi government. Between 1933 and 1945 their board of directors was a veritable list of the Who's Who of Nazi war criminals. 

Sound familiar?

After the war, most of the Allied Powers wanted the banks dissolved for OBVIOUS reasons.  However good ole John M. Kenyes stepped in and convinced the Allies to leave it intact...unbelieveable, but true life is sometimes more extremely than fantasy.

Essential Reading:






Also they've been calling for one world currency for some time...


Implied Violins's picture

Yup. They are all the same. These motherfuckers are all in cahoots, especially at the highest levels. They might bring down the FED, but then the rats from that ship will just wear different hats...BRICS hats. All of this bullshit is PLANNED. They are just playing out the globalization script.

Where's guillotine man? He should chime in here soon...he is needed...

HamFistedIdiot's picture

Will the bubble burst? Will reality return to markets?

Some people say that "elites" intend to securitize the planet, bringing EVERYONE and EVERYTHING into the equity markets. We are moving toward an equity model for wealth. Apparently there are $100s of trillions worldwide remaining to pile into this. The internet and smart phones are facilitating this. The argument is that the debt bubble can grow 10x larger than it is presently because there is (and will continue to be) a much larger planetary platform to absorb this added liquidity. Bubbles may not burst for decades. This may be a new normal. The elites may be able to pull off making gold irrelevant. I, too, am a stacker. I don't have a plan B. Nor am I much diversified. I, personally, don't believe there should be financial instruments that gamble on every dimension of the planet. I don't believe in the casino-ization of Life, but that is what we have. I believe in employee owned companies (wasn't UPS that way once?) that profit share. Morally, people should have skin in the game. I am against hot capital. There is a new way of approaching wealth accumulation and I simply don't want any part of it. So I withdraw my feeble assets and sit on PMs, or plow into a business venture that I partly own and work for. I am confused. I am not a financial expert. Our leaders are lying to us. I don't trust anything that I can't lay my hands on. But the elites want everything digital and malleable, where history can be rewritten with a simple keystroke. Jack Burton and others say this will blow up. But maybe it won't. Unemployment, war, famine, pestilence, and billion-person-killing pandemics are highly deflationary. While ZH contributors can go on and on regarding how the fundamentals and 5000 year history lead to a rosy future for PMs (and reality in general), can't the elites just change the divisor in our equation, that we had taken to be a fundamental, and find a solution to the problem that we had thought impossible? Didn't these elites (Gates, Rockefeller, Branson, Turner, Rothschild, etc.) meet up 5 years ago and decide they need to take God-like actions to deal with population? Sorry about the negative rant here. But I don't have a lot of hope here, or at least not on the limited time line that applies to my own life.

Bay of Pigs's picture

Carney, Draghi, and the William Dudley....

The Squid seems well represented doesn't it? What a bunch of fucking assholes.

kchrisc's picture

My grandfather was an Oklahoma sharecropper. He once told me the following about the banks, local banks in his case:

"When they lie, one should check in the cellar for the truth.

When they tell the truth, one should hide in the cellar."

An American, not US subject.


"The guillotine, the people's debt-collector."

rejected's picture

The Grapes of Wrath tells the story of many of those Okie's. How true blue americans would bull doze someones shack down explaining they were sorry but they had to keep their jobs.

A gut wrenching story of demented banksters and clueless americans abusing their brothers and sisters for a little fiat. An amazing story of how far people will go to please their masters.

Implied Violins's picture

Ah, there you are. This thread needed your 'touch.'

Bankers won't let you check in their cellars. They live in fear of cadaver-sniffing dogs and ground-penetrating radar.

Peter Pan's picture

BIS might be fearful of the excesses but they are even more fearful of bankers being refused MOAR and the subsequent chaos they will unleash.

q99x2's picture

Put the bastards in prison and they won't surprised next time or is that too hard to realize.

ebworthen's picture

This is pablum from the BIS, vocabularistic duckspeak released as "cover your ass" verbiage to be fed to the sheeple after the next collapse.

They know it is coming, they are engineering it, so they need to release something like this to make it look as though they have an ounce of sanity for every ton of insanity they shovel, and a moral and ethical pebble for every mountain of evil they create.

Silver Exterior's picture

Being shocked or acting shocked.. 

Keltner Channel Surf's picture

When the Robot keeps sayin' "Danger, Danger!  Run, Will Robinson!" and nothin' happens 'cept continued multi-colored shooting stars across the skies of never-seen alien worlds, it's just a matter of time before they decide to pull out his battery pack once and for all . . . so the final warning will never come . . .

AdvancingTime's picture

Many of us the are far from optimistic. While the future is hard to predict, as in politics the people who watch and study the economy are becoming more polarized as to the direction of the economy. Many of us are slipping into one of the two distinct camps, one that sees this as an economy slowly on the mend with the worse behind us and the other who clearly takes the position that things are not working.

Not only have things gotten worse but the distorted economy and manipulated markets only mask the fact that a day of reckoning is fast approaching and we are facing a bigger and meaner economic set back then any the world has witnessed in modern times. More on this subject in the article below.


Keltner Channel Surf's picture

Or, to put it another way:  it seems the Robot is replaced with Eeyore, the existentialist donkey from Winnie the Pooh fame, but central bankers try to simultaneously silence his courageous, honest theories and appease Pooh (and his peasant followers) with a Super Soaker shooting streams of tupelo honey (Van references always welcome), but it will run dry due to Colony Collapse Disorder, ultimately vindicating the Heidegger-reading burro.

Eyeroller's picture

More BIS bullshit.  They just want to be on record that they 'warned us'.

shovelhead's picture

BIS Magic:

Look at this hand. It's called the concerned hand. Keep looking...

So you won't see this other hand steal the face right off your head.


zen0's picture

I suppose governments have no culpability in this fiasco.

Is it not government that desires the people to be pacified with deficit spending?

Central bank governors are political appointments.

They are doing what is required of them by (in democracies) the people's representatives, who are voted into office by the people.


Ergo, its your fault.

alexmark2013's picture
A global recession is closer than you think: 1. BIS warning. Fragile markets. 2. Japan's recession worse than thought. 3. German industrial output misses forecasts. 4. China trade data miss forecasts by a mile 5. The retail apocalypse accelerates in US http://investmentwatchblog.com/a-global-recession-is-closer-than-you-think-1-bis-warning-fragile-markets-2-japans-recession-worse-than-thought-3-german-industrial-output-misses-forecasts-4-china-trade-data-miss-forecasts/