[ExI] Johnson has ANOTHER "Aleppo moment"!

Dylan Distasio interzone at gmail.com
Thu Sep 29 23:27:07 UTC 2016

On Sep 29, 2016 5:35 PM, "John Clark" <johnkclark at gmail.com> wrote:
>>>> What happens when interest rates go back up?  With a debt this size, we
will devour our entire revenue just paying interest.  This will not be good.
> ​If the government is ever going to borrow money, as its been doing
nearly every year since 1835, then now is certainly the time to do it when
interest rates are almost zero.​

One of the main reasons interest rates have remained low is that central
banks are now the primary buyers of sovereign debt (in addition to the Fed
keeping the short end of the curve artificially low for an extended period
of time).   One scenario to consider is what happens when they start to
tighten short term rates and stop maintaining/expanding their balance
sheet.  Markets have not been allowed to clear properly since 2008.
Certain asset classes are inflating as a result including corporate debt
that is being used to retire stock  instead of being deployed for organic

The entire value of fiat currencies is dependent on a belief in the issuer
to make good on their IOUs.  What is going to happen to interest rates if
the world loses faith in a particular currency?
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