Are Central Banks Going To Intentionally Crash The System?

Since 2007, the world has packed on a truly staggering amount of Debt.  That year (2007) is now commonly referred to as a debt bubble. At that time, global debt was $149 trillion.

Today, 10 years later, it stands at $217 trillion.

Put another way, the world has packed on another $68 trillion in debt since the last debt bubble. In terms of Debt to GDP, the world has risen from 276% in 2007 (an already insane amount) to 327%.

Why does this matter?

Because this debt was built on the back of low interest rates. In the last 10 years, bond yields have fallen dramatically thanks to endless Central Bank intervention. In the US, Treasuries hit all time lows. In Europe and Japan, sovereign bond yields actually went to ZERO or even negative as far out as 10 years.

So we have a massive debt bubble based on interest rates remaining at or near record lows…

This is a bubble in search of a needle. And unfortunately for the financial world, Central Banks have just that.

Globally, Central Bankers have sent a clear message: the cost of money, AKA bond yields, is going up.

Global central bankers are coalescing around the message that the cost of money is headed higher -- and markets had better get used to it.

Just a week after signaling near-zero interest rates were appropriate, Bank of England Governor Mark Carney suggested on Wednesday that the time is nearing for an increase. His U.S. counterpart, Janet Yellen, said her policy tightening is on track and Canada’s Stephen Poloz reiterated he may be considering a rate hike.

Source: Bloomberg.

Let’s break this down…

The world is sporting a Debt to GDP ration of 327%.

All of this debt was issued at a time when bond yields were FALLING.

Central Bankers now want bond yields to RISE.

Are these people TRYING to crash the system?

A Crash is coming…

And smart investors will use it to make literal fortunes from it.

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Graham Summers

Chief Market Strategist

Phoenix Capital Research