368 TRILLION Reasons the Fed Won’t “Normalize” Rates

By: Graham_Summers

Many commentators are baffled as to why the Fed has suddenly reversed course. Throughout 2017 the Fed has talked repeatedly about raising rates several times as well as shrinking its balance sheet.

Then in the span of a single month, the Fed just about dropped all of this. Fed Chair Janet Yellen, speaking to Congress, confessed that the Fed is just about done with rate hikes and that any balance sheet reduction will NOT be used to drain liquidity from the system.

What happened to cause this change?

The bond market went into revolt with yields on the 10-Year Treasury breaking out of a major downtrend.

Why does this matter?

Globally the world has tacked on some $68 TRILLION in debt since 2007. All of this has been issued based on the assumption that interest rates would remain LOW.

Put simply, if 2007 marked a large debt bubble, today’s bubble is significantly larger with global Debt to GDP now at 327%. In this context, any rise in bond yields (meaning bond prices are falling) represents a systemic threat.

On top of this, there are over $368 TRILLION in derivatives that trade based on interest rates. Over $100 trillion of these are on US bank balance sheets.

Which is why the Fed has completely given up on hiking rates and is going to let inflation continue to percolate in asset classes.

This is going to send Gold and other inflation hedges THROUGH THE ROOF.

If you’re not taking steps to actively prepare your portfolio for this, you need to so now.

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Graham Summers

Phoenix Capital Research

http://www.phoenixcapitalmarketing.com

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2017 Copyright Graham Summers - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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