Via Kevin Muir of “The Macro Tourist” fame
One of the biggest pushbacks about my theory that inflation is the real worry for the markets, not deflation, is the argument that there is no demand for credit, and therefore, inflation will never be able to take root. There can be no denying that Central Bankers throughout the world have had much more difficulty creating inflation than they would have ever guessed. Draghi and Kuroda would have never predicted it would take negative rates and doubling their balance sheets every couple of years to stabilize their economies, nevertheless, this is where they find themselves.
Take a moment to think about the insanity of their policies.
First look at Japan’s short term rates. Negative at the front of the curve, and pegged to zero at the 10 year mark.
Then, consider the rate of Bank of Japan balance sheet expansion.
When it comes to Europe, like Mike Myer’s Saturday Night Live skit “Sprockets”, the ECB has experimented with some pretty weird stuff, pushing short term rates to asinine negative levels.
And the ECB’s pace of balance sheet expansion over the past year, would even scare Sprockets’ host Dieter.
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