Wednesday, May 6, 2015

UK Telegraph: Negative Rates Put World on Course for Biggest Default in History

Not that long ago you mostly found articles like this on alternative media sites. Now we have the UK Telegraph warning that there are big problems in the global financial system. The last line of this Telegraph article says:

"Both Keynsian and monetary economics seem to be in some kind of end game. What comes next is anyone’s guess."

Here are some quotes from this UK Telegraph article:
"Here’s an astonishing statistic; more than 30pc of all government debt in the eurozone – around €2 trillion of securities in total – is trading on a negative interest rate.

With the advent of European Central Bank quantitative easing, what began four months ago when 10-year Swiss yields turned negative for the first time has snowballed into a veritable avalanche of negative rates across European government bond markets. In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them."
. . . . 
"Not only has this never happened before on such a scale, but it marks a scarcely believable turnaround on the situation at the height of the eurozone crisis just a little while back, when some European bond markets traded on yields that reflected the very real possibility of default. Yet far from being a welcome sign of returning economic confidence, this almost surreal state of affairs actually signals the very reverse. How did we get here, and what does it mean for the future? Whichever way you come at it, the answer to this second question is not good, not good at all."
. . . . .
"The flip side of the cheap money story is soaring asset prices. The bond market bubble is just the half of it; since most other assets are priced relative to bonds, just about everything else has been going up as well. Eventually, there will be a massive correction, in which creditors will suffer sickening losses.
Nobody can tell you when that moment will arrive. We live in an “extend and pretend” world in which economies pathetically fight between themselves for any scraps of demand."
. . . . 
"Both Keynsian and monetary economics seem to be in some kind of end game. What comes next is anyone’s guess."
My added comments: 
The last line of this article got my attention. After all, watching for some kind of event that leads to the end of the present monetary system (and a reset to a new one) is one thing we do here. Jeremy Warner writing in the UK Telegraph joins a long list of those expecting it to happen at some point.

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