There has been speculation for the last several years that the bond market is officially dead, or about to be by giants like Bill Gross.
After QE and the zero interest rates a couple of years ago, I asked a friend if he thought that we would be in a similar situation as Japan. He just gave me a blank look.
From my perspective, it is the “I’ve fallen, and I can’ t get up economy.” It is a trap, and there is not a clear way out, at least not under a privately owned central bank.
The rates were reduced, in an effort to stimulate growth, which failed to occur, at least not to the levels that were required. So the question is, if the economy failed to grow in Japan and the US after free money, maybe we should be asking if we are giving the money to the correct people.
If the economy is struggling on all but Wall St., the MIC, the medical community, and government sector, then the captain obvious question is what will rising interest rates do to the economy? When banks issue loans, money is created in the amount of the principal of the loan, but the bank does not create the interest that is due on the loan, and the game of musical chairs begins in a robbing Peter to pay Paul economy. Those in the US with credit card debt, student loans, ARMs, and car loans, in addition to business loans will suffer more now than they have in the past. The businesses caught what I would guess to be a two year patch with the tax cut. Eventually, that will fail to add any additional juice to the economy, although raising business taxes would definitely worsen matters.
Check out these charts:
Without question, I lack the expertise of Bill Gross, but this seems like quick-sand to me!
How to Give a Central Banker a Nervous Breakdown in 13 Minutes – Andrea Iravani