Historian Edward Chancellor has warned that central banks, with their long-term flood of money, have created a bubble in all financial investments. This “everything bubble” is slowly deflating due to higher interest rates, posing high risks. Chancellor has been sounding the alarm about this bubble for years, attributing it to the ultra-low to negative interest rates set by central banks.
Despite recent increases in key interest rates by central banks, a major crash in the financial markets has not yet occurred. Chancellor expresses surprise at the resilience of the financial system in the face of these rate hikes. However, he cautions that historically, manipulating interest rates to low levels has always led to crises and catastrophes.
Chancellor believes that interest rates still have room to rise before reaching historical norms. He notes that the recent rate increases came from exceptionally low levels, with interest rates having been negative in many places not long ago. The consequences of higher interest rates are already being felt, particularly in sectors like real estate and banking.
Global debt has reached record levels, raising concerns about countries’ ability to service their debts if interest rates continue to rise. Chancellor predicts that governments will push for lower interest rates to ease the burden of their high debts. Geopolitical risks are also being underestimated in the current market environment, adding to the complexity of the situation.
Chancellor anticipates further economic and financial turbulence if the effects of higher interest rates persist. He points to the potential impact of rising inflation and geopolitical tensions on global markets. Despite recent market fluctuations, Chancellor sees opportunities for investors in areas such as inflation-linked bonds, value stocks, and emerging markets.
The bursting of the former bond bubble, exemplified by the sharp decline in some long-term bonds, signals a changing market environment. Chancellor expects inflation to continue rising, prompting shifts in investment strategies