QUESTION: Dear Martin, we owe your respect for what you are doing and I want to thank you for educating your followers like me. With the theme of this growing international crisis, can you provide ideas on what are the triggers, perhaps when it starts to surface? What can we observe to identify the beginning, the EU Bonds – you mentioned IGOV – the currency, what else? I guess all your followers are very interested in that.
REPLY: The first was the inverted yield curve that led many to think that we were going into recession last summer. Then, the Repo crisis hit and, despite being promoted as a coincidence due to taxes, after more than three months, the Fed cannot stop providing liquidity without going back and allowing free markets to increase rates in the short term. term.
The liquidity crisis has spread even to Japan. Here the Japan bank He stood up and announced that he would do it, but government bonds without any limitation also try to prevent interest rates from rising.
The ECB will have to deal with the entire crisis of negative interest rates they have created. They will be forced to allow rates to increase or all member states must agree to allow the ECB to adopt the same policies as in Japan: buy all government debt without limit.
Watch Europe. I don't see any way to avoid this crisis. Politicians are too busy with other things. The free market will boost rates upward and central banks will not be able to avoid raising rates ahead.