Crisis and Contagion: Getting Better, Getting Away With It, Repo 105, Rare But Deadly, China Bubble, Oil, No Hyperinflation

U.S. Financial Markets Return to Pre-Crisis Levels – Mark Perry – … Taken together, the return of these two important market indicators … provide further evidence that the worst is far behind us, and U.S. financial markets are once again stable and healthy. … – Carpe Diem Blog

————

Bankers Saying ‘We Got Away With it’ Risk New Crisis, Kay Says – By Jennifer Ryan - Bankers are resuming the risk- taking practices that led to the worst financial crisis in a century, threatening to create even worse turmoil, economist John Kay said. For “so many people I talk to in the financial sector, it’s kind of, ‘Phew, we got away with it, now we can get on with making money in the same old way,’”… “If we do that we’re going to end up, probably quite soon, with an even larger version of the kind of crisis we’ve just been through.” … – Bloomberg

————

Repo 105’s antecedents: Ken Lewis – John Hempton – I agree with Felix Salmon that the former Lehman staffers who defend Repo 105 are psychopaths – certifiably insane. They state (as if this justifies it) that … The only people who would worry about using an old trick to reduce leverage from 13.9 to 12.1, are “yappers who don’t know anything.” For those that don’t know Repo 105 was a sale and repurchase agreement by which Lehman parked about 50 billion in assets (presumably assets they did not want to discuss) overnight via a repo transaction so they would not appear on the balance sheet. – Bronte Capital

————

Financial Market Contagion May Be Rare, But It Can Be Deadly – From the “Now They Tell Us” Department. A new Working Paper from the Bank of England finds that while contagion in financial markets is rare, the effects can be severe when problems do arise. – has excerpts – Research Recap

link to working paper: Contagion in financial networks – Bank of England

————

China: the coming costs of a superbubble – By Vitaliy N. Katsenelson – China may seem to have defied the recession and the laws of economics. It hasn’t. When China’s bubble bursts, the global impact will be severe, spiking US interest rates. – Christian Science Monitor

————

Oil reserves ‘exaggerated by one third’ – By Rowena Mason – The world’s oil reserves have been exaggerated by up to a third, according to Sir David King, the Government’s former chief scientist, who has warned of shortages and price spikes within years. – Telegraph.co.uk

————