For two years since I first toyed with the idea that FOMC Chair Jerome Powell began ‘stealth tightening’ of US monetary policy, I’ve watched for signs that capital was preferentially flowing into the US at the expense of Europe.
The main indicator for me has been the US/German 10-year yield spread. These are the two benchmarkt bond markets for the US and Europe. One is the global ‘safe haven’ sovereign bond the other the European ‘safe haven’ bond.
Rutte’s government fell, the risk of a major political upheaval is rising. Who else other than Lagarde would buy Dutch debt at 3%
Spain’s government is about to change. Energy prices are starting to rise as we get into the winter. Who’s buying this debt below 3.75%?
It may be my confirmation bias talking but all I see is someone sitting on certain levels and intervening hard to ensure those levels are not breached for any length of time. The moment these yields get ‘out of the box,’ Lagarde comes in to tamp them back inside.
What’s happening in the financial markets is a harbinger that the bureaucratic inertia of the West is too powerful to overcome. They are preparing for the worst but still holding onto hope for the best. Once these yield walls fail, however, we’ll know there is no turning back.
Why? Because if the European sovereign bond market goes into rapid meltdown then escalation is the only politically expedient path for these narcissistic assholes to maintain power as their economies collapse.
The political upheaval on the ground is a few weeks/months ahead of the real turmoil under the surface of the capital markets. Lagarde is rapidly being put in a box by geopolitical imperatives and the opposition in the US to fighting a war with Russia over Ukraine.
For the West losing in Ukraine after this much blood and treasure have been spilled, fomenting a full-blown sovereign debt crisis which will consume not only a few more national governments but quite likely the EU itself, will be the end of that 300 year project I talked about at the beginning.
It’s both terribly complicated but incredibly simple.
And it could all coming crashing down in the next few weeks.
#TOMLUONGOhttps://t.co/v6tCc57nZt https://t.co/PGfwTsskS1
— Guillermo Ruiz Zapatero (@ruiz_zapatero) July 12, 2023
#TOMLUONGO IS "FOLLOWING" HEGEL HERE:
— Guillermo Ruiz Zapatero (@ruiz_zapatero) July 12, 2023
Not #curiosity, not #vanity, not the consideration of #expediency, not #duty and #conscientiousness, but an #unquenchable, #unhappy #thirst that brooks #nocompromise leads us to #Truth @TFL1728
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