It’s The Inflation, Stupid!

The mechanisms that drove cheap money since 2010 did nefarious damage within the financial asset system. Quantitative Easing buying back bonds to force interest rates lower caused the relative price of financial assets to shift. Negative interest rate policy forced investors to take more risk for less yield. The money pumped into the financial markets did not fertilize the real economy by boosting “real” lending – but was internalised within financial assets, pushing up the prices of bonds massively, and stocks by insane amounts. Inflation – pure and simple. The corporate bond market saw record volumes – but much of that remained in the financial asset market as debt was used to buy-back stock.