Is Free Money Actually the Root of All Evil?
The Debt Spiral: A Recipe for Disaster
As the banking crisis reaches its boiling point, the world is witnessing a repeat performance of the 2008 Great Financial Crisis. The bond market is exhibiting all the earmarks of a vicious debt spiral, characterized by soaring borrowing costs, a crumbling fiscal position, and evaporating investor confidence.
Since the great fiat experiment began over 50 years ago, we have witnessed persistent currency debasement, leading to increased inflation, mounting debt, and unsustainable economic growth. The government’s reliance on excessive fiscal spending as a solution to current problems has proven ineffective in addressing systemic issues and promoting sustainable economic recovery.
The bond market is sending out warning signals that are difficult to ignore. The 3 months versus 10 year spread on the yield curve has reached alarming levels, signaling potential risks of higher than expected inflation rates or even deflation in the long term. Despite this signal, none of the major credit rating agencies have spoken up about these concerns.
The Silence is Alarming
It’s worth noting that none of the major credit rating agencies have publicly expressed any concern regarding the high levels of systemic debt and its implications for financial stability. Standard & Poor’s (S&P), Moody’s Investors Service, Fitch Ratings, and DBRS Morningstar have remained relatively silent about these matters.
Their inaction is even more astonishing given that we witnessed a massive surge in money supply over the last three years, resulting in heightened inflation rates. This has led to price volatility at unprecedented levels. The risks of continued exposure to markets while seeking safe havens through bonds can be calamitous.
Commercial Real Estate Sector: A Time Bomb Waiting to Explode
Lately, there have been warnings about serious problems concerning the commercial real estate sector, and these issues resemble those seen during the 2008 Great Financial Crisis. We saw it first-hand with the collapse of Silicon Valley Bank recently.
Lisa Shalett from Morgan Stanley Wealth Management warns us that over half of all $2.9 trillion commercial mortgages must be renegotiated in the next two years with likely interest increases of up to 400% – which is a nightmare scenario waiting to unfold!
As regional banks account for the bulk of lending, they have suffered through the banking crisis, so their potential lack of capital and expertise leaves little wiggle room.
Watch Out!
We cannot afford to rely on human intuition. Trading with Artificial Intelligence (A.I.) will become indispensable due to persistent rising commodity prices while currency devaluation and rampant interest rate increases further threaten volatility in many asset classes.
In light of this increased uncertainty risk factors, only using A.I. can help guide the way as we navigate treacherous markets through precise algorithms powered by huge datasets and machine learning.
