“How do you unwind the distortions of the last 12 years? These include the pernicious effects of ultra-low rates, the massive stagflation in financial assets (massively higher prices and minimal yields; lower yield for more risk) and the very real long-term disincentives of zero interest rates on growth, investment and business innovation and evolution. “
“And then there is the fact that inflated financial assets put most of the central bank created wealth into the hands of a tiny number of asset owners – all that money that governments and central banks have been printing pushed up bond and equity prices, meaning it has gone straight into the hands of the already tremendously wealthy! While the middle classes and poor suffered austerity, the top one percent have become obscenely rich. No wonder concerns on wealth inequality has gone through the roof.
“The challenge of the next 10-years will be unwinding all these effect. If you were to simply unwind QE and raise rates – the result will be the most utter and complete market wipe-out of all time. It will destroy investment savings, markets and collapse nations as confidence in fiat money and government debt evaporates.
“Which is why markets believe central banks and governments will remain complicit together to keep markets stable – by more distortions, bail-outs, low rates and QE infinity. Great for markets? How long? Only in the short-term.”