If the Fed were to end its asset purchases, interest rates would rise and all debt-related financial products would plunge, the derivatives bubble (an astronomical $638.7 Trillion, or 10 times global GDP according to the BIS) would explode, the banks would again become insolvent, and the U.S. bond market would collapse. And let’s not forget the impact higher interest rates would have on real estate and consumption.
The G7, or the seven most industrialised countries, account for half of a world GDP that stands at $30Trillion. The debt of those seven countries amounts to $140Trillion. A simple 1% rise in interest rates would bring in an extra cost of $1.4Trillion.
In this context, Ben Bernanke cannot put an end to QE.
Ben Bernanke’s « Syrian Moment »
There’s a shocking parallel to be established with Barack Obama’s loss of credibility with regards to the recent events surrounding Syria. A majority of countries have stopped having blind faith in the American government and its arguments and justifications for military intervention. Read more…