Well, the time has finally arrived.
Since 2008-09, the world has become addicted to 0% and negative% interest rates, combined with other extreme central bank monetary policies including quantitative easing and bailouts to equity, and bond markets.
This never-before-tried monetary experiment slowed the world from sinking into a deeper hole, but these extreme policies also enabled governments, corporations, and households to borrow incessantly without fear.
Now central banks face another awkward moment. Extreme fiscal spending combined with global lockdowns added to 0% and negative% interest rates has created an explosive inflationary environment that has people all over the world up in arms.
In response, the world’s largest central banks have begun a process of raising interest rates and reducing the amounts of other forms of monetary stimulus.
In this latest IceCap Global Outlook, we share with readers why this pivot by central bankers will increase the probability of financial market stress across numerous economies and markets, and specifically why Europe, China and emerging markets are particularly vulnerable.
Thank you for reading.