Loading ...It doesn’t matter if the European and US Central Banks are unhappy with ZIRP/NIRP. They have no real choice, being locked into the global game of Credit Chicken with Japan, which is addicted to ZIRP, and China which is one prick away from an epic credit-bubble deflation. And they are also constrained by domestic forces – European economy is addicted to NIRP already. The US Fed tried to turn away from the epic chicken crash with the rate hikes, but couldn’t go it alone.
A healthy financial system would be able to sustain debt repayments through organic growth without requiring credit increases above the rate of GDP increase. The fact that we no longer live in such a world is telltale evidence that the “bezzle” (accumulated bad debt and unrecognized fraud) is historically huge (consistent with the increasingly visible corruption).
We live in a debt based economy. The entire economy is based on borrowed money. This creates a debt cycle, as people can only borrow a finite amount of money before they reach a point where they can no longer service their debts.
This cycle is typically about 10 years, and we are now past due for the correction. We are seeing the beginnings of the end though as sub prime debt delinquencies and default are steadily rising. Sub prime is the canary in the coal mine. The FED knows this and is now taking desperate measures to delay the inevitable.