Here we go again: credit crisis in slow motion

It's the way to ruin a date: start talking about the bond markets. Not that you should want to ruin a date; it’s also perfectly okay not to go. But everyone has experienced that first meeting not living up to the high expectations at some point. Thus, you need to be cautious with high expectations, but that’s beside the point. By starting with a boring topic, you give the other person a prompt to end the date with familiar excuses: the laundry is still in the dryer, I have to walk the dog, my mother is still in the bath, think of anything. The advantage is that you don’t have to do something unpleasant yourself. The topic of 'bond markets' is a tried-and-true method for this, but you could also use watershed elections, the history of stamp perforation in the Netherlands, or the article you recently read in a legal journal about the optimal structure of a homeowners' association.

Nevertheless, bond markets are exciting. Something is happening there. We have seen a remarkable increase in yield over the past few days. That is the interest rate on the secondary market for government debts. In the long run, this means that those governments will have to pay much more interest on their debts. They earn that money by raising taxes for citizens, which includes you and me. Look, it is rather interesting. This week, U.S. Treasury Secretary Scott Bessent decided to buy government bonds, debt instruments, from the U.S. government. As a result, the price is rising. That is indeed strange, as a government with a budget deficit needs to borrow money through those bonds to be able to spend. So, you are borrowing money to provide a loan to yourself. You are indeed at the end of an economic cycle if you are relying on this kind of absurdity.

Source: Arno Wellens

Read: https://www.arnowellens.nl/p/daar-gaan-we-weer-kredietcrisis-in