Bond Bubble Will Explode Violently

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Central banks are incapable of saving economies or creating growth. The only thing a central bank can do is create inflation. These market manipulators set forth on a journey seven years ago to save the world by engaging in massive monetary manipulation, euphemistically called Quantitative Easing (QE), and a Zero interest rate policy known as (ZIRP).

As I could have told them before they started, all this easy money will fail to create viable growth. The economy, held back by massive debt levels, initially clocked in at 0.2% for the first quarter. This number is set to be revised down to negative territory due to a huge increase in the trade deficit during March. And the second half isn’t setting up to be much better either.

But the Fed was successful in re-inflating the housing and equity bubbles and also creating another new massive bubble in the bond market.

Despite tepid growth, most at the Fed have become anxious to wave the “Mission Accomplished Banner” and to move towards interest rate “normalization.” Ceremoniously, they have set goals for the economy to reach in order to begin that long journey: unemployment around 5% and inflation at 2%.
Read more at AffluentInvestor

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