Central Bank Zero Interest Rate Trap
Central bankers are planners who believe they know better than free markets. Central banks have trapped themselves. It is a trap with no escape, without causing a major economic crash. Boom and bust cycles can be delayed, not stopped.
By: Dr. Steve Johnston author.com
Bank of America analyst Michael Hartnett calculates that the Treasury supply will outstrip Fed purchases in Q1 2021. The U.S. Treasury is scheduled to issue $2.371 trillion in new treasuries in 2021, but is on schedule to purchase only $960 billion treasuries in 2021. The open market can only absorb so many Treasury bonds. The foreign market is drying up. China and Japan are no longer the largest buyers. The Federal Reserve will have to double its current QE to monetize the current deficit, without factoring another fiscal stimulus.
Total public and private debt in the U.S. is currently $82 trillion. Global debt is now $255 trillion, which is 330% of global GDP. Central Banks are now trapped. If they raise zero interest rates and stop QE, world markets will crash. If they continue with ZIRP and QE, currencies will devalue and inflation will spike. Jerome Powell's playbook is to follow the Bernanke-Krugman-
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Dr. Steve Johnston