Loading ...Bob Hoye- Real interest in Bust
History repeats :
Real Long-Dated Interest Rates: A Disaster In Waiting:
“One of the features of great financial bubbles has been that real long-dated interest rates 1
go down. It is part of the party. But in the inevitable contraction they go up. Hugely. On
the five great examples the typical increase has been 12 (no typo) percentage points. ”
“The following chart shows that with our bubble the rate declined to somewhat below 1
percent into June. The rise since is part of the pattern identifying a post-bubble contraction.
The potential is for a dislocating rise in real long-dated interest rates.”
Its not certain that it will.
But if it does, EVERYTHING changes.
Perhaps there’s a point where de novo money creation by CBs actually shows up in inflation expectations, and then there’s no putting Jeannie back in bottle.
If the uber bears in gold are correct, this would likely be the force behind that move.
With the EU members, the UK, Japan, and several other developed nations sitting with negative sovereign rates there is no way that US rates get anywhere near 4%, much less what Hoye is bloviating about. Global money flows / FX traders would pour trillions into the US Dollar and US Treasuries with even a hint of that kind of rate spread between the US and the rest of the world. Not gonna happen….. and just another in a long line of Hoye fantasies.