The debt binge and the reckoning ahead

Markets know.  Central bankers apparently don’t. When what was balanced becomes imbalanced, market forces push back.  Low prices cure low prices (increased consumption) as high prices cure high prices (increased production).  A wonderful mechanism when allowed to work properly. The low cost of debt as a result of the seemingly never-ending loose money policy of central bankers has created an imbalance, and those same bankers are feeding that imbalance to the delight of borrowers.  Those who would not normally borrow find the imbalance too ripe to ignore and therefore step in to take advantage of the arrangement. Investors seeking any “reasonable” return purchase the debt at near historical low returns.  If and when rates rise, those holders of this debt, floated at these abnormally low rates, will suffer, and in no small way. Massive debt creation is the great unspoken side-effect of the faked interest rates, courtesy of the...(Read Full Post)