Dutch Central Bank Warns Of Market Calm Before The Storm:

Tyler Durden's picture

With one foot out of the door of Germany's finance ministry, the former head of the German economy, Wolfgang Schäuble, 75, delivered a fire and brimstone warning over the weekend, telling the FT in an interview that there was a danger of "new bubbles" forming due to the trillions of dollars that central banks have pumped into markets. Schäuble also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans, something we warned about since 2012, and an issue which remains largely unresolved.

Taking a broad swipe at the current financial regime - which he helped design - Schauble warned that the world was in danger of “encouraging new bubbles to form”.

"Economists all over the world are concerned about the increased risks arising from the accumulation of more and more liquidity and the growth of public and private debt. I myself am concerned about this, too," he said echoing the concern voiced just one day earlier by IMF head Christine Lagarde, who said the world was enjoying its best growth spurt since the start of the decade, but warned of “threats on the horizon” from “high levels of debt in many countries to rapid credit expansion in China, to excessive risk-taking in financial markets”.

And while Schauble's dramatic warning was not surprising - prominent economists have a habit of telling the truth once their tenure is over, and once they start selling books warning about all the consequences of policies they helped adopt - one day later a more surprising, and just as urgent warning was delivered by the Dutch central bank, DNB, which on Monday said that ultra-loose monetary policy in the euro zone has run its course, and excessive risks seem to be building up in financial markets making the financial sector vulnerable to a sudden correction.

“It increasingly feels uncomfortable to have low volatility in the markets on the one hand while on the other hand there are risks in the global economy,” said Klaas Knot, the president of the Dutch Central Bank, at the presentation of DNB’s biannual financial stability report according to Bloomberg.

Putting the current unstable equilibrium in its temporal context, Knot said that the current "picture resembles that of the period before the financial crisis."

Taking a page out of Mark Faber playbook, the DNB labelled the threat of a sudden downturn in markets, brought on by a return of risk aversion, as an “acute” risk for the international financial sector, capable of starting a new financial crisis in weaker euro countries and beyond.

And, according to the Dutch central bank, only one thing could prevent a further build up of risks, eventually resulting in a crash: Knot reiterated a call to fellow board members at the European Central Bank to start phasing out monetary stimulus measures. The “time has come,” he said. “Economic growth has been above potential for months and the threat of deflation is gone.

“The program has achieved what realistically could be expected from it,” Knot said about QE, adding that it supported growth, and reduced investment costs.

Of course, Knot is merely the latest to fall for the paradox of reflexivity, where he sees the product of central bank intervention as the object that was meant to be cured by said intervention - a process which has pushed yields on European junk bonds below the yield on the US 10Y Treasury, among other market distortions. In reality, if one were to reduce or eliminate the tens of trillions in liquidity injections by central banks, the world would find itself right back in the eye of a financial crisis hurricane, prompting central banks to unleash even more "unorthodox" measures, culminating eventually with central banks purchasing equities, as JPM's Marko Kolanovic previewed last week.

Later this month, the ECB - rapidly running out of German bunds to monetize - is expected to decide on the fate of the central bank’s bond-buying programme, potentially announcing another taper of its current QE which purchases €60 billion in sovereign bonds per month.

Still, even Knot admits that whatever the ECB's decision, any slow down or restriction in ECB intervention will have to be gradual, confirming that the ECB remains trapped by the market and any sharp, adverse reaction will promptly force the ECB to resume nationalizing the European capital markets.

“Interest rates will stay very low for a very long time, even if we decide to phase out our bond buying program at our next meeting. Nobody at the ECB is talking about raising interest rates yet.”

And, soon enough - once markets get reacquainted with gravity - nobody at the ECB will be talking about any normalization whatsoever.

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Ahmeexnal's picture

Is this what TRUMP was warning about a few days ago???

BaBaBouy's picture

ECB Soaring balance Sheet . . .  Gee, I Wonders how much Phys GOLD they were buying ???

IntercoursetheEU's picture

... and some day one of these blind squirrels will find a nut and become famous spinning the wheel of misfortune...

The Management's picture

“It increasingly feels uncomfortable to have low volatility in the markets on the one hand while on the other hand there are risks in the global economy,” said Klaas Knot.


Feels like im watching an annotated Discovery show of animals humping.

TheLastTrump's picture

One day we'll all realize, in hindsight of course, that yes Maynard, it WOULD have been a great idea to load up the credit cards at Apmex. :)

silverer's picture

Wolfgang likes der gold, ja?

grasha87's picture

I've reviewed several Austrian Economics books and have more coming up for those of you interested on my channel:



abyssinian's picture

These clowns would "warn this and warn that", once finished with their bullshits, they go print more money and buy stocks. 


Go fuck yourself Ducth whatever you are.. lol

TheLastTrump's picture

Hope not, rather do Korea.

slimycorporatedickhead's picture

So then wheres Holland? So who are the dutch? And what about the Netherlands? Were talking to a central banker from a country that were not even 100% sure exists

Dave's picture

You don't know much about Holland do you? Maybe you should read up about the Dutch and who they are.

Francis Marx's picture

As long as there is big cash dip buyers, how can this market really crash?

Quantum Bunk's picture



Lots of fiction, even here at ZH has been passed around about X means mkt cant crash. Mkt will crash by 80% even with 100 bn a month QE

Ryland's picture

Having more sellers than buyers

peddling-fiction's picture

Friday (October) 13th coming up.

900 years later, and with a chip still on their shoulders.

Implied Violins's picture

They can keep the chip as long as they lose their heads...and this time, they will.

peddling-fiction's picture

Yes, this time they will all be wiped out, and their many minions, and children.

Nothing short of a miracle is needed.

But they need to bust their last move, that is needed for final judgement.

I say this with no anger nor emotion.

peddling-fiction's picture

On another note Martin Luther posted his 95 theses on the 31st of October (Halloween) 500 years ago.

Let me repeat that; 500 years ago. Lots of big dates 

Fait accompli?

Hkan's picture

Politicans crash label cosy little harmless "bubble" of soap. Who cares few bubble bursts.....could even be fun watching....

Relabeling real life.......knowing people buy it....

So whats the problem?

Ben A Drill's picture

War changes everything.

This time, war will be on USA’s soil as well as abroad.

Those food stamp EBT losers will get their free money cut off. Send them all to those camps that Zero Hedge has been talking about.

The rest of us will fight.

Anteater's picture

Fight to lotion up their dingleberry excrusted raspberry rose bud.

TheLastTrump's picture

If it's dingleberry encrusted it's not raspberry colored.

Ben A Drill's picture

Russia, China, Iran, and the spark will be North Korea. Any questions?

I thought a war was going to happen because of oil. Maybe still is.

If we are heading into a mini ice age then the war may be starting because of lack of food and water.

Not to mention all .gov debt.

TheLastTrump's picture

All 4 of those nations have a 5th column in the USA.


Then, we have our own 5th column represented by leftists/progressives/liberals/lying bloodstained media/ EBT crowd/ lying thieving politicians on both sides.

Rick Cerone's picture

Herr Pedo has spoken.

tuetenueggel's picture

And with that Dutch FAIC ( Financial Asshole In Chief ) Dijsselbloem in Brussels they are very credible.

agstacks's picture

What did they not buy equities like the Swiss? \s

Kartoffel's picture

may the games begin...

mo mule's picture

Well at some point margin sellers will want more premium and that squeeze will send the markets reeling, as is with the Fed now pulling back on it's bank roll, Rothschilds wants interest on this newly created money.? And why shouldn't they,, someone has to pay for them to play, right out Hillary's and Podesta play book isn't it?  Trump is going to force the MIC to choose WAR or PEACE  Hopefully China steps in a takes over NK, nuturalize's the little rocket boy before Trump goes and nukes their ars. Something extrenal along this way comes that will knock the markets off their highs and sends it into the gutter once again, we are at/near the highs so anytime within the next few months, to many fish in the air, for someone not to get smacked.......


tuetenueggel's picture

Schaeuble is a senile asshole in Chief ( SAIC ).

Who pumped billions and billions into bankrupt Greece, Italy, Spain and Portugal ?


Cozy Vanilla Sugar's picture

The Germans should be required to pump more into these countries. If each country had its own currency, Germany would be way worse off (Euro is weaker than the deutsche mark would be)  and the others much better.  

Singelguy's picture

The answer is simple if not obvious. Billions were pumped into those countries to help them pay the interest to the banks that held all the original debt; GERMAN BANKS! If the German banks held little or no Greek, Italian, Spanish, or Portuguese debt, Schauble would not have given them a dime and let them all default.

Cozy Vanilla Sugar's picture

In my limited market experience, if a central banker sees it coming, it's not coming or it's a long way off.

TheLastTrump's picture

Am I mistaken or didn't the Fed withdraw liquidity from the markets in June 2008?


Didn't they just start unwinding their balance sheet again....last week?

silverer's picture

Kind of like that guy yelling on the beach at Aceh to warn people, just before the tsunami, and nobody would listen.

katagorikal's picture

Yes, like an extension to that old financial aphorism:

When the tide goes out, you can see who's been swimming naked, 
then you all get blended into a salty red sludge,
by a roiling tsunami full of rocks and palm trees.

AntiMatter's picture

There are no coincidences, the Zionist Cabal decides how and when a "crash" will occur as a pretex for a huge false flag and the start of yet another global?** war. "Order out of Chaos"...?

(**The power of repetion)



johnjkiii's picture

Don't worry. They'll blame it on Trump and the failure of capitalism

krage_man's picture

Sick and tired of doom and gloom articles...

Don't you understand that equity is only getting up from here because quality of money/currency/debt is disappearing in western countries????

The only way to preserve your wealth is to put in equity assets.... 


grasha87's picture

I've reviewed several Austrian Economics books and have more coming up for those of you interested on my channel:



grasha87's picture

I've reviewed several Austrian Economics books and have more coming up for those of you interested on my channel: