12 Reasons Why Negative Rates Will Devastate The World
It has been a thesis over 20 years in the making, but with every passing day, SocGen’s Albert Edwards – who first coined the term “Ice Age” to describe the state of the world in which every debt issue ends up with a negative yield as capital markets and economies collapse into a deflationary singularity – is that much closer to having the victory lap of a lifetime. Although, we doubt he is happy about it.
Commenting on the interest rate collapse he has been (correctly) predicting ever since he first observed Japan’s great bubble bust of the 1980s and which resulted in both NIRP and QE, and which he (correctly) expected would spread across the rest of the world, leading to a “Japanification” of every major bond market…
… Edwards said that what bond markets are telling us is “that the cycle is ending with the central banks having failed to drive core CPI inflation higher. So Japanese-style outright deflation lies ahead at a time when western economies have piled debt sky high.”
Needless to say that’s not good, not least of all because we now live in a world in which the bond universe with negative yields continued to grow at an exponential pace, rising rapidly over the past two weeks and reaching a record $16.4 trillion…
… rising significantly above the previous mid-2016 record high of around $12.2tr. The expansion of the universe of negatively yielding bonds as a percentage of total is shown below: as of the last week, this proportion increased further to around 30.0%, above the mid-2016 record high of 25.8%.
Meanwhile, as the world is blanketed by Edwards’ Ice Age, one can see the spread of negative rates
Continue reading 12 Reasons Why Negative Rates Will Devastate The World at ZeroHedge.