Jeremy Warner, the much-respected Telegraph writer, has published a piece about a contagious global credit bubble which threatens to bring down bond markets (and presumably lots of other markets too). And all this despite massive quantitative easing by central banks.
Eventually, he says, there will be a massive correction, in which creditors will suffer sickening losses.
If you haven’t time to read the article, at least take note of his conclusion:
“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. One burst of money printing is met by another in an ultimately futile, zero-sum game of competitive currency devaluation. As if on cue, along comes another soft patch in Britain’s economic recovery, with first-quarter growth quite a bit weaker than expected. Like a constantly receding horizon, the point at which UK interest rates begin to rise is pushed ever further into the future. It’s like waiting for Godot. When Bank Rate was first cut to 0.5pc in response to the financial crisis, markets expected rates to start rising again in a year. Six years later, Bank Rate is still at 0.5pc and markets still expect them to rise in a year. In Europe it’s not for four years.
Both Keynsian and monetary economics seem to be in some kind of end game. What comes next is anyone’s guess.”
Please tell us what you think -Ed