Late last month the notorious financial blog Zero Hedge published an analysis regarding the economic after shocks that could occur if interest rates were to spike above 3.5%.
Indeed eight years into “recovery” from the great recession of 2008, it is easy to forget just how extraordinary Federal Reserve policy remains. Just because the can was kicked down the road doesn’t mean that issues have disappeared, and the post and discussion from Eric Peter’s does not paint a comforting picture, but is well worth the read.
From Zero Hedge, Eric Peters: If Rates Ever Rise Above 3.5% It would Spark Massive Defaults:
Earlier today in his weekly note, One River CIO Eric Peters explained that in their attempt to overturn the natural order of the global economic “ecosystem”, what central banks have done is “stunning, unprecedented… and arrogant”, and as a result it is only a matter of time before another “peak instability” moment emerges as “it stands to reason that our volatility-selling machine will break one day. We saw a glimpse of this in 2008-09.”
And yet, as Peters concedes in a follow up note, those same central bankers don’t have any other option but to kick the can because as the CIO notes, any attempt to break the current ultra-low rate regime would “spark massive defaults.” (Excerpt)
It should be said, that as interesting and thought provoking as Zero Hedge can be, things sometimes get a bit sensational. But at the same time it also provides a perspective that you won’t read in many places and should not be ignored.
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