Simone Wapler – La Chronique Agora (France) –
The reduction of bond redemptions of the ECB causes an unexpected collateral damage: the rise of the United States which threatens the zombies.
In the United States, it is the fault of the European Central Bank, explained Bloomberg yesterday.
To sum up: Mario Draghi’s purchases have dried up the European bond market; institutional investors (zinzins) in US Treasury bonds; Mario Draghi Reduced Euro Securities Available on the Market; Suddenly the zinzins of the Eurozone abandons the US bond and resumes domestic securities.
In fact, Draghi’s redemptions were so massive that they exceeded the bond issuance capacity of some governments; the movement of zinzins to the dollar zone was therefore important. Bloomberg mentions the figure of 1 200 billion dollars of European purchase.
The volume of the European bond market peaked at more than 3,500 billion euros in early 2015 before the ECB intervened. It has now been reduced to 1.6 trillion euros.
Draghi’s QE has also forced rates down in the United States. The survival of zombies unable to honor their debts depends on low long rates. It seems that, for the moment, the American zombies are more in danger than the European zombies.
The S & P 500 equity index starts to notice the change in the bond market. With 10-year yields at over 2.8%, shares, perceived as very (too?) Expensive, fall.
What will Jerome Powell do? Will he have the courage not to act and let the market go? Will the zombies finally die?
Nobody has the answer to these questions (and certainly not the zombies of the Office of Financial Research supposed to alert the public in case of danger, as Bill Bonner explains ).
But three things are sure:
- The instability of the financial markets is progressing.
- The survival of the current parasitic financial system depends on low rates.
- You have nothing to gain by leaving your money exposed to these risks for lousy pay.
[Editor’s note: How to put your savings at the service of the productive economy, regain compensation, earn growing stocks at price-to-earnings ratios? Everything is here .]