I haven't made the call that the bond bubble is in imminent danger of popping. I've actually even given an explanation in a previous post of how central banks could possibly go about deflating it without causing any serious damage. The downward pressure on bond yields and NIRP policies have so far been beneficial for the gold price as it has counter acted the popular argument that gold doesn't produce any yield. Anything that doesn't devalue in a negative yield environment starts to look good.
Article from Bloomberg where Bank of Italy's Governor has come out saying Italian banks don't pose a systemic risk.
Visco Says Italian Bad Loans No Systemic Risk as Amount Overdone
Visco told Bloomberg in Chengdu, China, after a meeting of G-20 finance chiefs. The loans “are evaluated as if they could be taken care of over time without problems,” but even if they had to be dealt with immediately and written off by half, that would “hardly” trigger contagion for the rest of the world, he said.
He also said
“Contagion happens when you have a problem of psychology, not when you have a problem of non-performing loans,” he said.
Well if he was doing his job properly and Italian banks where well regulated and didn't have problems with non-performing loans there would be absolutely zero risk of any contagion.
But this comment takes the cake.
The net bad loans “amount to 87 billion euros but they are not all relevant because many banks in Italy are doing pretty well,” Visco said, pointing to Intesa Sanpaolo SpA and UniCredit SpA. “The system at large is not what we should consider.”
Has Visco looked at the share price of UniCredit lately. I wouldn't be employing him as my stock picker if he reckons UniCredit is "doing pretty well". No wonder Italian banks are in so much trouble if that's a bank governors idea of doing well. Eshmun
