Global shadow banking assets rose to a record $75 trillion (£46.5 trillion) last year, new analysis shows.  The value of risky investment products, mortgage-backed securities and other non-bank entities increased by $5 trillion to $75 trillion in 2013, according to the Financial Stability Board (FSB).   Shadow banking, which is not constrained by bank regulation, now represents about 25pc of total financial assets - or roughly half of the global banking system. It is also equivalent to 120pc of global gross domestic product (GDP).   The FSB, which monitors and makes recommendations on financial stability issues, said that while non-bank lending complemented traditional channels by expanding access to credit, data inconsistencies together with the size of the system meant closer monitoring was warranted.   "Intermediating credit through non-bank channels can have important advantages and contributes to the financing of the real economy; but such channels can also become a source of systemic risk, especially when they are structured to perform bank-like functions and when their interconnectedness with the regular banking system is strong," the FSB said in its annual shadow banking report. 

Ultimately some of this money leaks into physical assets and we will see tremendous inflation and asset bubbles. The money creation is all being retained in the banking system whilst M2 money supply is crashing to record lows. All the economic meters are going into the red except GDP growth because that is funded by debt funded by money printing which is fueling the distortion in our financial system. Even the IMF is ringing the fire alarm.
Economically this is a fascinating experiment with FIAT money which has not been around that long compared to its predecessor (asset backed currency) invented by Sir Isaac Newton as Master of the Royal Mint. This shadow is 120% of Global GDP haha and `no systemic risk`. They just type figures into a computer and call it money.  No one understands this and no one can explain what it means... It`s like trying to regulate the Sun while flying like Icarus...Granular data from 23 countries which stripped out assets not related to credit intermediation - or taking money from savers and lending it to borrowers - showed the size of the shadow banking system stood at $34.9 trillion in 2013, compared with $34 trillion in 2012.  Under this measure, growth of shadow banking in China was even larger than under the headline measure, rising by 40pc in 2013 to $2.7 trillion.  The FSB data follows a report by the International Monetary Fund this month which urged regulators to do more to police activity in the non-bank sector.  The FSB and IMF said more data were needed to conduct in-depth healthchecks of the sector.

 

ECB President Mario Draghi's last move towards more QE is no more than stupidity on steroids, even words like misdirected and boneheaded do it a disservice. This is more proof that the Euro-zone is in big trouble, both the union and the flawed currency is again begging to crumble.

One is forced to wonder if Japan and the Yen will crash first considering how each day Japan slides closer to the economic abyss or whether the Euro will lead the way into the wastebasket. Draghi has helped the countries of Europe kick the can down the road but this only delays the failure on the Euro. More on how the Euro-zone has failed to make any real reforms in the article below....Tension about the way the EU has dealt with the debt crisis could erupt this month when voters from the 28 nations elect members of the European Parliament for the first time since Greece nearly brought the euro currency bloc to its knees. The required bailout unleashed a wave of German-led austerity demands that continue to rile several of the more indebted nations. A moderate deceleration in growth and world trade coupled with geopolitical risks over Ukraine and tensions with Russian have not been the foundation needed to propel the Euro-zone forward. As of today it is easy to say many issues remain unresolved....The European Commission recently said they expect the 18-nation euro-zone would grow by 1.2% this year and 1.8% next year. In both cases, the figure was 0.1 percentage points higher than in earlier predictions. The wider 28-nation EU's prospects have been revised up by the same amount, to 1.5% in 2014 and 2% in 2015. "Recovery is gaining ground," said Olli Rehn, commissioner for economic and monetary affairs. "The worst of the crisis may now be behind us." However, he also warned that the recovery was "still modest".

"The illegitimate and illegal elections held in parts of the Donetsk and Luhansk regions on Sunday 2nd November 2014 were organized contrary to Ukrainian law. They do not constitute any basis for the free expression of the will of Ukrainian citizens and as such will not be recognized by the European Parliament nor the international community. The attempts by Moscow to legitimize these illegally-organized elections are against the Minsk Agreement and could undermine the efforts aimed at finding a peaceful solution to the conflict and the reintegration of these areas into the legal and constitutional order of Ukraine", commented Croatian MEP Andrej Plenković, Chairman of the European Parliament’s Delegation for Relations with Ukraine.

For Plenković, the only elections valid in Ukraine are those carried out under the Constitution and electoral law adopted by the legitimate Ukrainian authorities, such as the early parliamentary elections held on 26 October 2014, where he led the European Parliament’s Election Observation Mission. He emphasized the European Parliament’s strong support for Ukraine's EU-oriented reforms.  The EPP Group maintains that in the parliamentary elections of 26 October, the Ukrainian people voted not only for Europe and the territorial integrity of Ukraine, but also for democracy, reforms and the unity of the country.

Opec's oil production is unlikely to change much in 2015 and there is no need to panic at the crude price drop, Opec's secretary general has said, adding to indications the exporter group is in no hurry to cut output.

Abdullah al-Badri said output of higher-cost oil supplies such as shale would be curbed if oil remained at around $85 a barrel, while the organisation enjoys lower costs and will see higher demand for its crude in the longer term.

The drop in the oil price to below $100, the level many Opec members had endorsed, has raised questions over whether Opec will cut supply when it meets in November. Mr Badri said Opec's output was unlikely to change much next year, adding to signs a decision to cut in November is unlikely.

"I don't think 2015 will be far away from 2014 in terms of production," Mr Badri said at the annual Oil & Money conference in London. "There is nothing wrong with the market."

Brent crude has dropped more than a quarter from above $115 per barrel in June as abundant supplies of high-quality oil such as US shale have overwhelmed demand in many markets, filling stocks worldwide.

Almost one in five of the eurozone’s biggest banks have failed the European Central Bank (ECB)’s comprehensive test of their financial safety, according to leaked documents. Twenty-five of the 130 lenders being assessed by the ECB have reportedly failed the stress tests, the biggest-ever single review of the single currency’s major banks.  Both the ECB and European Banking Authority (EBA) will release the results of its stress tests at 11am on Sunday. The two bodies’ assessments, which model scenarios such as downturns in the housing market, a new recession and a spike in borrowing costs, cover similar ground but have important differences. The ECB is conducting an additional review of eurozone banks’ assets ahead of it taking over as the primary regulator of banks that use the single currency; the EBA’s tests also cover European banks that are not part of the euro, including British ones. According to a draft memo of the results seen by Bloomberg, only 10 of the 25 banks to fail the tests will be told to plug capital shortfalls. The tests cover the banks’ positions at the end of last year, and the remaining 15 to fail the tests are reportedly judged to have raised the equity to meet the shortfall since then... The truth is, the entire global financial system is bankrupt.I mean, a Ponzi Scheme can never equate to being more than a fraud, to being more than a lie. And that is all our global financial system actually is. A massive fraud run by an elite group of financial criminals. Financial criminals who are being protected by our now thoroughly corrupted governments. Politicians and bankers. A match made in hell. 

The US growth rate will slow in the last three months of 2014.

Chris Williamson, chief economist at Markit explains: “The flash PMI survey data show the pace of economic growth easing for a fourth consecutive month in October. The weakened growth of new orders and downturn in business optimism suggest that growth and hiring could slow further in coming months. “Having signalled an annualised rate of GDP growth of approximately 3.5% in the third quarter, the October readings indicate that the pace of economic growth looks set to moderate in the fourth quarter, down to perhaps 2.5% or less if the PMI falls further in coming months. “There are clearly many concerns, ranging from worries about the impact of Ebola, the Ukraine crisis, the ongoing plight of the Eurozone , signs of further weakness in emerging markets and the Fed starting to tighten policy. “We should not lose sight of the fact that the pace of growth nevertheless remains robust, having merely eased from very strong rates in prior months. The survey is also indicating another month of non-farm payroll growth in excess of 200,000 in October. This sustained strength should help alleviate recent worries about a sudden deterioration in the economy’s health. The pace of expansion appears to be easing only moderately.”

I mean to say the ECB rigged the tests to ensure the results were acceptable to 'the markets'

Just let the euro implode - I think the deflationary effects are inevitable. Whether a western country has deflation and a strong currency or moderate inflation and a falling currency are just different ways of consumers having less spending (and earning) power. It's inevitable because the developed economies, which previously had linked in small countries with benefits all round, linked in to China and India, two countries that dwarf the west in terms of bodies. As an analogy, it's like connecting 1000s of carriages to a train that was already struggling due to lack of high quality fuel. China and India for the foreseeable future will offer far more downward wage pressure than they will yield potential markets. This is because their people are poor, so have little spending power for what the west makes, and anyway more likely to save because that's both their nature and their need given the lack of welfare systems. Add in the cultural difference that they don't have a wide and deep leisure culture to support domestic consumption, and you can see why in a connected world they will export deflation in one form or another. It's also deflationary for the same reasons when they move en-masse to the west. Generally, Asians aren't great consumers. They buy property and gold but they don't partake in the wide range of passtimes common in the west that support the advanced economies. The media trumpet this as positive values of thrift, but it's a requirement of an advanced economy that there is advanced consumption. We really do need to work to live not the other way around. India and China (and much of Asia) are at totally different stages of human and economic development. Linking then to the west will be a shock . . . The fact of the matter is that the ECB can 'get-away' with these tests because of (1) German and French collusion to paint a 'nice picture' to please the EU elite and (2) the ECB has the luxury that it is not the actual the lender of last resort within the EU, and therefore does not have real market responsibility re adverse market feedback for its advice and actions.