If we ask, "What's changed?," two under-appreciated dynamics pop out: risk and consequences: risks are rising globally in a multi-dimensional self-reinforcing way, and the consequences of the Federal Reserve's 14-year policy error known as ZIRP-zero interest rate policy-are finally manifesting in unwelcome ways.
The Federal Reserve's 14-year suppression of interest rates to near-zero as it opened the floodgates of credit has finally generated consequences: inflationary pressures can no longer be put back in the bottle, for a variety of reasons, including unfavorable demographics, global changes in supply chains, resource depletion, and so on.
Now the economy is dependent on historically unprecedented low rates of interest or it collapse in a heap.
The economy is an open, dynamic system, and rock-bottom yields and interest rates generate self-reinforcing feedback loops that generate forces beyond the Fed's control.
The Fed's apparent control of yields and interest rates generated an illusory belief that the Fed could also control the consequences of their 14-year ZIRP policy error.
Note that rates are simply within a long-term range of between 3% and 5%. But even 5% rates are crushing the economy, a reality currently being masked by rapid expansion of public and private debt and the resulting doom spending-spending borrowed money like there's no tomorrow.
I've been writing about debt saturation for 15 years, and perhaps we're finally seeing debt saturation take hold: debt saturation means borrowers have maxed out their capacity to borrow more: they lack the income and/or collateral to borrow more, and as rates rise, their spending declines accordingly.
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