The Biggest Black Swan of them all …False Beliefs!…” Once the belief that “debt is an asset …or even money” is broken, just as a spooked herd of cattle runs wild, so will investors.”

Monday, June 8, 2015
By Paul Martin

By Bill Holter
Monday, 8 June 2015

Global markets are changing drastically and showing volatilities like we saw back in late 2008. I am not talking about stock markets, it is the debt and currency markets that are schizophrenic. Oddly, even after all of the various Western “QE’s”, liquidity suddenly looks like it is drying up. A great article as to why even the depth in the U.S. Treasury market has disappeared can be read here. Various credit markets (important one’s!) have cracked over the last month and the myth of “zero percent interest” rates is in the process of being shattered. I want to visit several topics in this piece, each one with the ability to break the derivatives chain which is exactly what we are headed for!

First and foremost, I believe we are about to find out central banks are not the omnipotent powers we’ve been led to believe. You might as well say central banks have been perceived as all powerful, all knowing and the savior of any and all things “bad”. The confidence in central bank’s abilities to fix anything and everything has grown to epic proportions and is now ingrained everywhere. This thought process is so prevalent, we might as well say it is “imprinted” in the mass psyche from birth!

What we are seeing now are credit markets revolting against the risk of over levered sovereign treasuries and the fact of receiving zero compensation for the outsized risk. Investors were led and cajoled by central banks into this corner of uncompensated risk. It was easy. Central banks led by the Fed only needed to announce their “plans” and investors stormed the credit markets in front running fashion.

A natural problem or two is arising. Interest rates have been zeroed out for too long. As the three Fed stooges finally admitted last week, zero interest rates are only justified by crisis. Continued zero interest can mean only one of two things, we are still in a crisis behind the scenes or rising interest rates cannot be tolerated by markets with no margin left. Both of these are the reality! Before going any further, one thing needs to be made clear. Central banks do not, better said CANNOT set interest rates. Yes, they can push, pull, “suggest” and even buy sectors of the credit market to affect interest rates…

…BUT ONLY in the short run. My point is this, “the short run” is ending! The central banks are running up against the “confidence clock” if you will. The economic and financial lies told are now being revealed for what they are, WHOPPERS! Think about it, do any numbers make sense? Inflation? GDP? Employment? Spending? Housing? Nothing reported now makes any sense at all and the lies have by necessity gotten so big, even little children know them not to be true.

The Rest…HERE

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