Central banks have put the whole system at risk! - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 22 July 2014
Central banks have put the whole system at risk! A  A  A

London, England

"The rebels attacked our camp. We had to make a run for it. The government troops who were supposed to be guarding us ran too. 'Musungu'...'musungu' I heard them yelling. A 'musungu' is a white person. They wanted to capture us..."

This springs not from the imagination of an early 20th century novelist. This was an email from yesterday, coming from our youngest son, who has (had) a summer job at a mining project in Africa.

The world is a safe, stable place. Must be. Janet Yellen says so. The bond market says so. The stock market says so. Who are we to argue with them? Besides, why else would anyone lend money to Senegal for less than 6% yield?

And yet, the old risks are still out there...so are some new ones.

Nature - and life, in general - comes with risks. Bad weather. Accidents. Bad judgment. Political risk. Market risk. Credit risk.

To these natural hazards, central banks have added some unnatural ones. In the name of promoting stability and growth, central planners have slowed growth to a stall...and put the whole system at risk.

--- Advertisement ---
Catch Them SMALL If You Want BIG Returns...

Ever wondered how some investors manage to make handsome returns effortlessly?

Returns like 160% in 2 years, or 288% in 2 years 5 months, and sometimes even more!

Well, they did it through investing in small and hardly known companies.

And more importantly, they had grabbed these companies long before they had hit the headlines.

Now we are sure that you too are eager to join this group and learn how they are 'making it'.

So, click here for full details...

The ensemble of planet earth's financial and economic system is usually fairly robust. Yes, you get some deadbeats. Some blow ups. Some mistakes and some accidents. But they come one at a time...and the system absorbs them...adapts...and moves forward. But when you control the price of money for too long...and when you lend too much money and are too sans souci about it....your margin of error narrows as your debt increases.

No longer is the danger isolated and particular. It becomes generalized...and systemic. All the world's collateral comes to be over-priced. And upon this collateral - inflation in asset prices of all sorts - the entire capital structure rests. Until it all falls down.

Back in Africa...

Fish have replaced groundnuts as Senegal's chief export. But apparently the seas off West Africa are not rich enough in fish to all the country to international aid organizations. As a financial risk, Senegal is subprime. What more proof do you want? Senegal counts on the kindness of strangers to pay its current expenses. Lenders must believe the strangers' generosity will never flag. And the world economy - from which the strangers derive their own incomes - will never fail.

In the nearby Democratic Republic of the Congo, the risks are more corporal than capital. Edward reports from a mining project deep in the jungle:

"The rebels don't usually give us trouble. We're mining tin. They don't care much about it. At least, that's what they told me. Everywhere we went, we had an armed guard. But we didn't expect trouble.

"Besides, we had the helicopter. If things got hot we were supposed to just fly away.

"But they attacked the camp yesterday. Everybody started running. I couldn't get my passport or any clothes or anything. I just grabbed by laptop because I just happened to have it with me.

"We couldn't take the helicopter because they were shooting at it. So, we ran to the village. They know us there. Some of our workers come from there. And I was just there for a party."

"I was with [the mine foreman]. We thought we'd be safe in the village. Everybody had been so nice just a week before. But then the rebels attacked the village. And everybody started running again.

"We ran into the bush and hid there until about 3 am. Then, we made our way to the next village. From there, we were able to get to Bukavu.

"I don't have a job. Or a passport. Or any money."

Edward is on his way to Kinshasa, where the US embassy has promised to give him a temporary passport. From there, he'll fly to Paris, where his father will be eager to meet him and hear the rest of the story.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Get The Daily Reckoning directly
in your mail box.
Just enter your e-mail address » 

Read our Privacy Policy and Terms Of Use.

Equitymaster requests your view! Post a comment on "Central banks have put the whole system at risk!". Click here!


Recent Articles:
Deep State First
August 23, 2017
Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.
A Darkness Is Spreading Across the US
August 22, 2017
Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.
Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working
August 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
Trump Takes a Beating
August 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.