Lacalle Warns ECB and Fed Tightening Risks Credit Crunch as Sovereign Debt Pressures Mount - VT Markets
Lacalle Warns ECB and Fed Tightening Risks Credit Crunch as Sovereign Debt Pressures Mount - VT Markets
Source: VT Markets
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DW NOTE
Lacalle is right that central banks are in a trap, but he's understating the predicament. The Fed holds rates at 3.5%-3.75% while oil sits at $102 and the 10-year yield pushes 4.95% — that's not tightening, that's falling behind the curve while pretending otherwise. The sovereign debt he warns about is already here: the U.S. ran a $1.4 trillion deficit through June, up 3% year-on-year, with borrowing costs rising into a supply shock the Fed cannot contain without breaking something large.