There is an interesting paradox at work as central banks suppress interest rates.
by Charles Hugh Smith, Of Two Minds:
Correspondent Mark H. recently asked: “What is your take on what the outcome will be if/when interest rates start rising?” Let’s break this excellent question into two parts: 1) what might cause rates to rise, and
2) what consequences will likely result from rising rates/yields?
There are two articles of faith in the central-bank religion:
1) We can keep interest rates near-zero for as long as we deem necessary, and
2) We can suppress inflation at will, too.
The question is: can they do both at the same time for as long as they wish?
If either interest rates or inflation (and they are correlated) start rising, the central banks’ claims of control evaporate.
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