Central Bankers Finally Have a "Duh" Moment
Mike Shedlock | Oct 09, 2014

The IMF finally had a "duh" moment in what should have been obvious years ago. The IMF finally realizes that almost zero borrowing costs has encouraged speculation rather than a hoped-for pick up in investment.

Now, the IMF warns period of ultra-low interest rates poses fresh financial crisis threat.

The Washington-based IMF said that more than half a decade in which official borrowing costs have been close to zero had encouraged speculation rather than the hoped-for pick up in investment.

In its half-yearly global financial stability report, it said the risks to stability no longer came from the traditional banks but from the so-called shadow banking system – institutions such as hedge funds, money market funds and investment banks that do not take deposits from the public.

José Viñals, the IMF’s financial counsellor, said: “Policymakers are facing a new global imbalance: not enough economic risk-taking in support of growth, but increasing excesses in financial risk-taking posing stability challenges.”

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Where the Money Went

Junk bond speculation
Stock market speculation
Stock market buybacks at ludicrous prices
Robots in lieu of hiring
Free profit for banks thanks to interest on "excess reserves"
Private equity firms buying up houses
In Europe, banks loaded up on their own allegedly risk-free bonds
In China, property bubbles and profitless SOEs

Where the Money Didn't Go

Higher wages
Infrastructure
Investment

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More:
http://finance.townhall.com/columnists/m...moment-n1902702


Reminds me of Greenspan's comment on the housing bubble. :
Greenspan Says “Who Could Have Known?”
http://www.cepr.net/index.php/op-eds-&-c...ould-have-known