by Tim Price
“There is no simple, painless solution. The world has to reduce debt, shrink the financial part of the economy, and change the destructive incentive structures in finance. Individuals in developed countries have to save more and spend less. Companies have to go back to real engineering. Governments have to balance their books better. Banking must become a mechanism for matching savers and borrowers, financing real things. Banks cannot be larger than nations, countries in themselves. Countries cannot rely on debt and speculation for prosperity. The world must live within its means.” – Satyajit Das, ‘Extreme Money – Masters of the Universe and the Cult of Risk’.
The commentary is now off on its summer break and will reappear in early October.
There is now almost $16 trillion worth of sovereign debt trading with a negative yield. Last week the credit bubble entered new territory with two euro zone issuers of corporate debt, Germany’s Henkel and France’s Sanofi, joining them. This may, just may, happen to mark the top of the great bond bull run that started as far back as the early 1980s. By Friday of last week, the implications of an ugly slide across bond and stock markets may have led some fund managers and traders to soil themselves, or suffer heart problems, or both.