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Published on Gold Anti-Trust Action Committee (http://www.gata.org)

IMF official foresees central banks buying everything in next market crash

By cpowell
Created 2015-06-19 03:33

Don't look now, Jose, but central banks are ALREADY trading everything, to keep gold and commodities down and equities and bonds up:

http://www.gata.org/node/14385 [1]

http://www.gata.org/node/14411 [2]

http://www.gata.org/node/14818 [3]

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IMF's Vinals Says Central Banks May Have to Be 'Market Makers'

By Huw Jones
Reuters
Thursday, June 18, 2015

Central banks may need to become "market makers of last resort" if there is not enough liquidity during volatile sell-offs, a senior International Monetary Fund official said on Thursday.

Regulators worry that when interest rates begin rising from their prolonged low levels there will be a stampede for the exits by bond investors and that markets won't have the liquidity or capacity to deal with it smoothly. ...

Jose Vinals, director of the IMF's capital markets department, said market liquidity has shrunk as capital requirements on banks have increased but that there was no simple relationship between the two.

... Dispatch continues below ...



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Central banks buying bonds to conduct unprecedented stimulus programs over the last three years -- most recently the European Central Bank -- have also been blamed for sucking volume out of the market, making it less liquid.

Vinals said it was unclear whether markets were simply more volatile or whether there were systemic consequences, but it would take time to find a solution,

"The time it takes for the global regulatory community and central banking world to find a solution this time may be longer than the time where one episode of big illiquidity happens," Vinals told a meeting of the International Organization of Securities Commission in London.

"Then the question is what to do. In my view the only thing that can be done at that time is that central banks should become again market makers of last resort."

Ashley Alder, chief executive officer of Hong Kong's Securities and Futures Commission, said central banks acting as market markers of last resort was the "last thing" he wanted to see.

"If you react to that by piling more intervention on intervention, you encourage more untoward risk taking and you end up with even greater amount of mispriced risk," Alder told the conference.

"You end up with a never-ending cycle that is harder and harder to get out of," Alder added. ...

... For the remainder of the report:

http://www.reuters.com/article/2015/06/18/imf-markets-vinals-idUSL5N0Z43... [8]

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Source URL:
http://www.gata.org/node/15465