That’s Right…We’re Covering The 2010/11 Bank For International Settlements Annual Report

Economics literature is dry.  Tedious for most to read.  This does not mean it is immune to the discipline of cryptojournalism.  In fact, with so many concocted words and triple speak, it’s a fertile meadow to sow.  Let’s start at the beginning.

On Sunday, the Bank For International Settlements released its’ 81st Annual Report.  Doesn’t spell a pretty picture.  Or paint a pretty sentence.  Whatever turn of phrase (or malapropism) you may choose, the information is out for general (niche) consumption.   So this is sort of chemotherapy for that gnawing desire you’ve had to understand global central banking, but have been unable to receive.  Your insurance won’t cover the cost, as a pre-existing condition.

I’m your Canadian groom, and our paper marriage will provide you with the needed treatment.

Before digging into the annual report, there are some choice bits to sift out of the General Manager’s speech.  Dubbed “Building a foundation for sustainable growth,” it’s the broad, vague rhetoric one would expect from a $8,000 suit.  We’re still able to find there are pearls of information, even in a boilerplate speech.  That’s the focus of this post.

From there, we’ll sift through the trash Per Jacobsen lecture, another fancy piece of word craft.  That’s coming up, but first, we’ve got the speech from Jamie Caruana, General Manager for the BIS (pronounced biz, in the biz).

After the garnish and accent, we’ll discuss the 81st annual report.  That will be fun.

Before we’re even lulled into a confused trance by the fun language of macroprudential de-leveraging (I’m not shitting you, that’s a totally feasible pairing of words.  Honest), the first truth bomb of the day’s dropped in the middle of town.

Read the whole speech yourself.  It isn’t that long.  Plus, I believe it is always better to see things for yourself.  Better to understand something within context, rather than taking the looney perspective of some two bit blogger as meaning anything more than folly.  So, anything worthwhile in this speech?  Well…..

Economies and financial systems are still vulnerable to even modest shocks, and the likelihood of severely adverse developments has not decreased.

Eep.  Alright, egotistical Americans.  It’s not your time yet.  Greece, Portugal, Ireland and Spain are queued up for the dunk tank.  We’ve got a sliver of time.  Until the whole planet is conducting transactions with special drawing rights.  Till then, we may as well enjoy the carnival.  Willful ignorance, right people?

Hey Greece, you're up

It’s actually disturbing to see the BIS so bluntly state severely adverse events are still as likely as they’ve been.  That’s worse than residing your home, to find the foundation is shot and coincidentally sitting on a fault line.  That’s a waste of money.  Do you need new siding when the house creaks and sways in the wind?  Since regulators and authorities are inevitably playing catch-up, irregardless of realm, I’m skeptical we’re past the worst, especially if mild shocks can cripple.

On another note.  Above you see the non-word irregardless.  What can I say?  Been a Homer fan for years.  I only point this out since spell check does not pick that up as being spelled wrong.  Macroprudential?  That’s ‘wrong’ according to spell check.  Financiers are either that far ahead of the pack or just making shit up as they go along.  As a cryptojournalist, I believe they’re way ahead of the curve.

Unregardless, it's time to move ahead

According to the GM, we’re careening towards a fiscal reckoning.  Alright, he didn’t say careening.  The phrase fiscal reckoning, sounding most sinister, was definitely a marquee point in the speech.  A fiscal reckoning?  The hell is that even supposed to mean?

People of the world, let it be know, the fiscal reckoning is upon us!  No longer will folding chairs have cushioning, that’s the way she goes.  Fuckin’ way she goes.  Amenities like trees in your parks?  Gone.  We’ve got a fiscal reckoning to handle.  The sky will turn green with envy money, and INFLATION will rain down on your sorry souls!

Who the fuck knows.  Fiscal consolidation is the call of arms.  Consolidate?  Didn’t we just recently enter the ‘too big to fail’ era of finance?  Consolidation?  Psshhhhh, much as I read and try to understand what central bankers mean, sometimes it’s even beyond cryptojournalism.  Unless the future means Coca-Cola Presents Bank Of America ATM/Nail Salon/Vending Machines.  I think people would be all for that sort of consolidation.

I kid, of course.  Nobody in their right mind would wait behind someone getting a manicure to go to the ATM.

There’s always the Brawndo model.  It’s got what plants crave.  They bought the FDA, and look how that worked out!

Brawndo has electrolytes

The consolidation from the fiscal reckoning is coming.  Don’t say I didn’t warn you.

So what exactly is ushering in the fiscal reckoning?  Glad I asked myself you asked.  Here’s one of my favorite little gems, in reference to the unsustainable track of some advance economies:

Rising dependency ratios, expensive publicly funded programmes for retirement and health care and the like put future commitments well in excess of future revenues.

….and the like….Now that’s what I’m talking about!  Broad, vague and cryptic.  Mr. Caruana went on to point out how “this, that and the other thing, et cetera, so on and so forth,” were putting a squeeze on liquidity.  Always be careful of this, that and the other thing.  Safely first, ’cause who likes doing things unsafely?

Don’t worry.  All is not doom and gloom.

To sum up, early action is needed. The question is not whether to consolidate fiscal policy. It is not whether to normalise monetary policy. And it is not whether to accelerate structural adjustment. It is when and how each of these will happen.”

Ooooohh, sorry.  That’s real gloomy.  Consolidate fiscal policy…it means governments (national and local) need to shrink their balance books.  That’s why news like this, where New York State Governor Andrew Cuomo is pressing to lay off upwards of 4,700 state workers in the Public Employees Federation, is good news in Basel.  In reality, the cutting loose of “mostly white-collar and technical job titles” is aces in the eyes of the BIS.  But that’s a tangent for another time.  Terrible news for public workers throughout the state, but that’s the prescription.  Swallow that pill, boys.  Doubt it’s the last.

All those semicolons.  A freshman year English professor would be furious:

A lasting foundation for monetary and financial stability requires regulation and supervision with a strong macroprudential orientation; monetary policy that plays an active role in supporting financial stability; and fiscal policy that amasses the buffers required for effective crisis management.

See?  Told you macroprudential is a word.  Before you wet yourself, that’s not why I’ve plucked this passage from the speech.  Nor is it the astounding use of the semicolon.  “…fiscal policy that amasses the buffers required for effective crisis management.”  Chew on that for a second.  Swish it around in your mouth.  Try and get a taste of buffer amassing.

While the prudent decision for struggling economies is fiscal consolidation via layoffs and shrinking extemporaneous debts (I’m looking at you D.C., with your myriad slapdash bailouts and stimuli), the global banking system needs another layer of infrastructure.  Bones, to protect the organs.  Those ‘buffers’ are more global financial technocrats in new and exciting positions, mandating and implementing standardizing controls.  So you know.

This has been a general dark bit of cryptojournalism, so I saved my favorite laugh for last:

Where possible, we should build strength now. Instead of taking the maximum time to reach the minimum standards, there is a good case for going faster and going further. Perhaps this time we will see a virtuous race to the top.

Regrettably, there is no video of the speech, but a fly on the wall tells me that punchline shook the roof.  Virtuous race to the top, priceless!  The Swiss: neutral they may be, they’ve got an uncanny sense of humor.

FYI, build strength now isn’t my italics.  They’re serious about that.  I won’t even address the premise of how backhandedly insulting a virtuous race to the top on the heels of taking max time for minimum standards sounds.  Whoops.

On that note, we can bid adieu to the General Manager’s speech.  It was fun.  That’s a word for it, yeah.  Fun.