The financial world upside-down: debt failure closer

World financial markets in the Intensive Care Unit being treated with…free cash. The French yellow vests have understood it. (Unsplash photo, by Norbu Gyachung, Paris France).

A round $10 trillion worth of bonds are currently being traded in world markets on negative interest rates. At the same time, the European Central Bank prepares to flood the Eurozone and the banking world with hundreds of billions of zero interest rate euros, in an abrupt change of monetary policy course from restrictive to accommodating.

No wonder then, why the yields curve of the American government bond yields is reversed, meaning the US Treasury can borrow at lower interest rates for ten year maturities than it has to pay for its three month government bills. The last time a reversal of long/short term borrowing cost/yield occurred was in 2007, just before the Wall Street stock market meltdown. The yield of a fixed income (coupon) generating bond falls when its price rises. Bond are considered as safe haven in times of uncertainty.

Free money for banks

The US Treasury’s yield curve inversion doesn’t necessarily mean a new Armageddon is around the corner. It will press, however, the American central bank, the Fed, to complete its own monetary policy U-turn and again start lowering its interest rates, hastily passing from lending cost increases, to decreases. As for calling back the $4.5 trillion it has printed and distributed free of cost to the American banks during the past years, there is no question any more. Capping is also forgotten as is the interest rates normalization.

Last Friday, apart from the bond yields curve reversal in US markets, the German ten year bond was sold and bought deep in the negative part of the chart. At the end of that day, the ten year ‘bund’ yields closed at -0.029, meaning investors will receive less after ten years than what they paid today to buy a German ‘bund’. The same is true for the Japanese government 10 year bonds. Like it or not, this is the financial environment we have to live in for many years on. Jerome Powell the head of the Fed, and Mario Draghi President of ECB both tried to restore some order in the global financial system but were blocked by reality.

Feeding the Mammoths

The financial Mammoths are not able to survive in case they are obliged to pay anything for the incredible leverage they have got or return a small part of what they owe to central banks. The world is twice more indebted now than in 2007 and nobody can say who is able to pay back on settlement day and who not.

In short, ‘blessed are the indebted’ but not the real everyday people. These last borrowers will lose their car, their home or go to jail if they don’t pay on maturity day. Only the financial Gargantuans can borrow from the central banks for free and never pay back. But what if one of them has overdone it, like the Lehman Brothers?

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Parliament commemorates the victims of the Holocaust

A Young entrepreneur cries out: “start in Europe, stay in Europe”

Half the world’s refugee children not in school, UN agency finds

The Eurogroup offered a cold reception to IMF’s director for Europe

Business should be joyful – just ask the sports world

Artificial Intelligence: These 3 charts show what people really think

A Sting Exclusive: “China is Making Good Stories not Bad Ones”, Ambassador Yang highlights from Brussels

Forget GDP – for the 21st century we need a modern growth measure

Impact of high debt levels on least developed countries ‘cannot be overstated’, says UN

Fashion’s hot new trend: clothes you don’t need to wash (very often)

What happens when you toss your water bottle in the trash?

This New York store is selling Christmas presents for refugees

These are the world’s 20 most dynamic cities

Gaza investigators call on Israel to review ‘rules of engagement’ as Gaza protest anniversary looms

Monday’s Daily Brief: WFP mulls ‘last resort’ Yemen aid suspension, top peacekeeping awardee announced, abuzz over Bee Day, Ebola threat ‘very high’

EU fight against tax-evasion and money laundering blocked by Britain

It’s time to strengthen global digital cooperation

Satellites and data are going to help us phase out fossil fuels. Here’s how

Why David Cameron’s large victory in UK elections will not pursue a ‘Brexit’

Further reforms in Sweden can drive growth, competitiveness and social cohesion

EU out to conquer African Union summit

UN postal agency ‘regrets’ US withdrawal

Technological innovation can bolster trust and security at international borders. Here’s how

10 million Yemenis ‘one step away from famine’, UN food relief agency calls for ‘unhindered access’ to frontline regions

Judicial independence under threat in Nigeria, warns UN rights expert

Eurozone: Inflation plunge to 0.4% in July may trigger cataclysmic developments

Here are what UNESCO considers to be remarkable new World Heritage Sites

Blockchain will make sure green pledges aren’t just greenwash: a new initiative by young leaders at the World Economic Forum

If innovators can solve India’s problems, they can save the world. Here’s why

Towards a seamless internal EU market for industrial goods

3 of Jack Ma’s best pieces of advice

State aid: Commission approves support for six offshore wind farms in France

European Business Summit 15th year: Controversy and Constructive Ideas

Estonia is making public transport free

Stateless Rohingya refugee children living in ‘untenable situation’, UNICEF chief

One migrant child reported dead or missing every day, UN calls for more protection

Primary Healthcare vs Specialization Careers, how to promote PHC to the Young Health Workforce?

Here are 5 security challenges Nigeria’s leader must tackle

Here are three ways organizations can prepare for tomorrow’s world

Sustainable Development Summit: ‘We must step up our efforts – now’, Guterres declares

1st Exclusive High Level Dialogue: China-EU Cybersecurity and 5G Cooperation

JADE Romania Celebrates the 4th Anniversary

Drowning in the Mediterranean this summer? Many happy returns

Telemedicine and the Brazilian reality

EU invests in green projects and bans single-use plastics while climate change requires more to be done

A Sting Exclusive, the European Commissioner for Energy Günther Oettinger writes for the Sting on “EU Industry: a major energizer”

Q and A on the draft digital copyright directive

In Sweden you can roam anywhere you like, without the landowner’s permission

Here’s how we can use agriculture to fight climate change

We need to measure innovation better. Here’s how

The UK to split if May’s hard or no-deal Brexit is pursued

5 droughts that changed human history

UN chief praises Malaysia’s death penalty repeal as ‘major step forward’

Human Rights Council election: 5 things you need to know about it

We’ve lost 60% of wildlife in less than 50 years

Talent, not technology, is the key to success in a digital future

Is the world living up to its climate commitments?

Inflation not a problem for Europe

EU finally agreed to cut roaming charges in 2017 but criticism is always there

How to end overfishing in the global South

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s