With respect to Canada, does this, by transference, imply hot money will flow into Australia as well? Australian bonds, property? Will Steve Keen be proven wrong and the private debt bubble continue to inflate as a result?
CI, interesting questions, I'll answer with "I don't know" and another quote:
First, here is our rule of thumb to determine if someone who talks about money, inflation or monetary policy has even a vague clue of what they are talking about: do a text search for the words: repo, shadow banking, collateral, collateral-chains, rehypothecation, or deposit-free money creation. If not one of those terms appears anywhere, feel free to toss the reading material right into the trash.
Fed's John Williams Opens Mouth, Proves He Has No Clue About Modern Money Creation.
As the AFR article I quoted in two posts up, it is all to do with the Shadow Banking system, which has its heart 4 transformations: Credit risk, maturity, liquidity & a new one to me "Collateral" (as per AFR article). An example of one of these "transformations" is a CDO - where a pile of say B grade securitised mortgages were bundled together and tranches or slices of various rating were produced - including AAA (on the basis that the AAA slice would get its interest and capital ahead of all other slices, and mathematical modeling showed that the AAA slice would be extremely unlikely to
ever default. We all know how that one worked out!)
Currently the shadow banking system is deleveraging, and governments and CB's and trying to lever up to compensate, from
On The Verge Of A Historic Inversion In Shadow Banking
Its now all about collateral - and this is running out. As I quoted above, traditional economics no longer applies Keynsian, Post Keynsian (Steve Keen) and Austrian, its all about trying to figure out the shadow banking system to predict what may happen next. The truth is we are way off the map.
check out this
map of the SBS (its too big to post here as an image)