15. March 2017 16:16
The two most important prices in World financial markets are wrong. The US 10-year Treasury yield and the US dollar, each representing the price of the dominant economy’s debt, are too high and distorted by capital flows. Whatever the future risk outlook, the World’s two primary ‘safe’ assets are mispriced. In large part, they have been distorted by the extraordinary liquidity injections made by World Central Banks since the financial crisis: in short, policy-makers gave us ‘cheap’ money but we chose to buy ‘safety’ with it. The unwinding of these distortions will cause some jitters over the coming two years, but they will essentially mean a 5-10% weaker US dollar and higher, near-4% US Treasury yields.