US Equity markets closed the week lower, as realists began to invade market reality. Modern Monetary Theory has reduced interest rates to inconsequence and expanded deficit/debt, to insurmountable levels. The biggest NO-NO in monetary policy was monitisation of debt, which is the issuance from the Treasury and the consumption by the supposed independent Reserve Banks’. Global Central Banks not only drove through this ‘Red Line’ but accelerated into a world of debt and deficit, never before contemplated. Modern Monetary Theory is not that modern. The Weimar Republic attempted the very same monetary experiment and the world got Hitler and National Socialism. The modern world will be found out by inflation, despite the manipulation of the data construction, which will expose the folly of the modern monetary theory.
The ECB is a construct and should not be taken as a guideline. They are attempting to become the Central Bank for the European Union, which is a collection of independent nations with independent monetary and fiscal policy. The only way this will work is if the Nations give up their Nationhood and submit. This will not happen. The more likely scenario is further Brexit’s. The world is being torn apart by growing globalism versus Nationalism. The commodity currencies have been beneficiaries of the US Dollar collapse, but sagging commodity prices (despite asset bubbles) have questioned the authenticity of the rallies. Modern currencies are measured against the US Dollar, which is not backed by Gold, but by sentiment, which is being destroyed by unheralded deficit and debt.
The NZD struggles to hold 0.7100, despite a mortally wounded reserve currency, while the AUD fell back below 0.7350. Everything is relative. Asset bubbles, across the classes, will be exposed by CPI/PPI/Inflation.