The Telegraph on the BIS report and the collapse in global lending

http://preview.tinyurl.com/6mewol

By Ambrose Evans-Pritchard

In its quarterly report, the BIS warned the US Federal Reserve, the Bank of
England and other central banks that near-zero interest rates and emergency
monetary stimulus may come at a cost.

By opening the cash spigot, the authorities risk displacing the money markets
and may "discourage banks from lending to other banks".

The money markets are a crucial lubricant for the financial system, but they
cannot function if rates fall too low. The sector can wither away, as Japan
discovered during its "Lost Decade".

The BIS also hinted that the European Central Bank and Sweden's Riksbank may
have blundered by raising rates

this year to contain the oil shock. It said short-term energy spikes have no
lasting effect on inflation or wage deals.

"Evidence suggests an absence of strong second-round effects on
inflation. The temporary inflationary impulse will soon drop out," it
said.

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