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Economics Nerd Central/ The Global Inflation Thread
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<blockquote data-quote="How bad boy" data-source="post: 7207445" data-attributes="member: 3028"><p>Who could possibly have predicted that rates would increase so much over the past year?</p><p></p><p>Hope folks took the advice last year and fixed mortgages.</p><p></p><p></p><p>The situation at Silicon Valley Bank is unlikely to be the end of that story. </p><p>There's $11 trillion of mortgage backed securities (MBS) <a href="https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1001.pdf" target="_blank">in the US alone</a>.</p><p></p><p>The European Systematic Risk Board reckons there's less than a trillion of equivalent securities in the EU.</p><p>[ATTACH=full]19770[/ATTACH]</p><p></p><p>So there is a chance that the EU avoids a major fall out at a financial system level from higher interest rates, but I really wouldn't rule it out. Don't know what the exposure of EU institutions are to the US MBS market. The last financial crisis was primarily driven by the US market.</p><p></p><p>Remember CDOs? Collateralised Debt Obligations?</p><p>Well a variant of that, the Collateralised Loan Obligation (CLO) is back:</p><p>[ATTACH=full]19771[/ATTACH]</p><p></p><p></p><p></p><p>It all looks and smells far too familiar. I think it's safe to say that on at least some fronts, this time it's different, but it's concerning when exactly the same sort of issues that caused the last crisis seem to be popping up again.</p></blockquote><p></p>
[QUOTE="How bad boy, post: 7207445, member: 3028"] Who could possibly have predicted that rates would increase so much over the past year? Hope folks took the advice last year and fixed mortgages. The situation at Silicon Valley Bank is unlikely to be the end of that story. There's $11 trillion of mortgage backed securities (MBS) [URL='https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1001.pdf']in the US alone[/URL]. The European Systematic Risk Board reckons there's less than a trillion of equivalent securities in the EU. [ATTACH type="full"]19770[/ATTACH] So there is a chance that the EU avoids a major fall out at a financial system level from higher interest rates, but I really wouldn't rule it out. Don't know what the exposure of EU institutions are to the US MBS market. The last financial crisis was primarily driven by the US market. Remember CDOs? Collateralised Debt Obligations? Well a variant of that, the Collateralised Loan Obligation (CLO) is back: [ATTACH type="full"]19771[/ATTACH] It all looks and smells far too familiar. I think it's safe to say that on at least some fronts, this time it's different, but it's concerning when exactly the same sort of issues that caused the last crisis seem to be popping up again. [/QUOTE]
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