After tonight's significant downgrade and warning from Moody's about Canadian Banks, the following seems extremely prescient now.
Authored by George Stockus via BeatlesOnBanking.com,
Stability breeds instability – this was economist Hyman Minsky‘s lasting contribution to the craft. The Minsky Moment , popularized during the 07-09 US housing crisis, basically suggests breeding animal spirits too long creates systemic problems.
After a few short days of respite - suggested by some as indicative that the worst is over - China commodities are crashing again tonight with Dalian Iron ore snapping below 460 to its lowest since before Trump's election...
This has erased the entire post-Trump reflation trade hope...
Just hours after the Fed's March "dovish" rate hike, when stocks paradoxically surged to all time highs and yields tumbled, Goldman found something strange: "surprisingly, financial markets took the meeting as a large dovish surprise—the third-largest at an FOMC meeting since 2000 outside the financial crisis, based on the co-movement of different asset prices." Even more surprising is that according to Goldman, its financial conditions index, "eased sharply, by the equivalent of almost one full cut in the federal funds rate." In other words, the Fed's 0.25% rate hike had the same e
Amid Poloz-described "unsustainable prices" in various cities, and just days after the collapse of Canadian mortgage lender Home Capital Group and our discussion of the dire state of Canadian savers (and their record household debt), Moodys has cut the ratings on six of Canada's largest banks because of "ongoing concerns that expanding levels of private-sector debt could weaken asset quality in the future."
So what do you do when you've pulled forward every single car sale you possibly can courtesy of low interest rates, lengthening terms and generally loosening credit standards targeting incremental subprime buyers? Well, you take a play out of the 2008 mortgage crisis playbook and just start submitting fraudulent loan applications, of course.
And, at least according to a new study from Point predictive, that is exactly what is starting to happen. Per Bloomberg: