Historian Edward Chancellor has warned that the long-term flood of money from central banks has created a bubble in all financial investments. This “everything bubble” is slowly deflating due to higher interest rates, posing high risks. Chancellor has been sounding the alarm about this bubble for years, attributing it to the ultra-low to negative interest rates set by central banks.
Recent increases in key interest rates by central banks have not yet led to a major crash in the financial markets, which has surprised Chancellor. However, he cautions that historically, manipulating interest rates to low levels has always led to crises and catastrophes.
Chancellor believes that interest rates still have room to rise before reaching historical norms. He notes that the recent rate increases came from exceptionally low levels, with interest rates having been negative in many places not long ago. The consequences of higher interest rates are already being felt, particularly in sectors like real estate and banking.
Global debt has reached record levels, raising concerns about countries’ ability to service their debts if interest rates continue to rise. Chancellor predicts that governments will push for lower interest rates to ease the burden of their high debts. Geopolitical risks are also being underestimated in the current market environment, adding to the complexity of the situation.
Chancellor anticipates further economic and financial turbulence if the effects of higher interest rates persist. He points to the potential impact of rising inflation and geopolitical tensions on global markets. Despite recent market fluctuations, Chancellor sees opportunities for investors in areas such as inflation-linked bonds, value stocks, and emerging markets.
The bursting of the former bond bubble, exemplified by the sharp decline in some long-term bonds, signals a changing market environment. Chancellor expects inflation to continue rising, prompting shifts in investment strategies. Overall, he emphasizes the importance of monitoring interest rates and understanding their impact on various asset classes in the current market landscape.
In conclusion, historian Edward Chancellor warns that central banks’ long-term flood of money has created a bubble in all financial investments known as “everything bubble.” This bubble is slowly deflating due to higher interest rates posing high risks.
Central banks have recently increased key interest rates but not yet led to a major crash in financial markets which surprised Chancellor.
Despite this increase in key rate hikes by central banks there are still more room for them before reaching historical norms according him.
He believes that recent rate increases came from exceptionally low levels with some places having negative interests not long ago.
The consequences of higher interest rates are already being felt particularly in sectors like real estate and banking.
Global debt has reached record levels raising concerns about countries’ ability service their debts if it continues rising.
Chancellor predicts governments will push for lower interests rate after this increase to ease their debt burden.