The headlines alone in the leading financial media this weekend give you an idea of the level of panic surging to the surface in the City of London and Wall Street, as their “everything bubble” threatens to blow out everywhere at once. “Why Britain is on the verge of a Cataclysmic Financial Crisis” (The Telegraph, Oct. 8); “Mincing Machine of the Bond Markets Has Spread the Pain Wide” (Financial Times, Oct. 8); “Rising Bond Yields Are Exposing Fiscal Fantasy in Europe” (The Economist, Oct. 4); and “Rising Debt Burden Raises Fears for Financial Health of American Households” (Financial Times, Oct. 8).
The last of these articles gets closest to staring into the eye of the hurricane: The fact that the policies of the Fed itself have led to the predatory hedge funds taking over the $25 trillion U.S. Treasury market, the benchmark for all bond markets globally.
Author Katie Martina wrote: “The message is finally sinking in that rates are staying high and central banks do not intend to reverse course. Global bond markets have been through a mincing machine in the past few weeks, inflicting pain on everyone from retail investors to insurance companies.” She presents a couple of possible explanations, including that “we are at the foothills of a catastrophic reckoning with the fiscal incontinence and addiction to low rates that had taken hold over the previous few decades, and we should brace for a serious challenge to the global dominance of the dollar and U.S. government bonds’ centrality in financial markets. This will not blow over soon.”
