[sgbuffett]

Some  will say people have said this before and nothing happened. This type of complacent thinking is dangerous. Just because we avoided impending doom in the last does not mean we can do it all the time. 4 yrs ago, we also think pandemic won't ever happen...that another war in Europe is impossible. Look at where we are now.

The GFC tells us, govt can mess up and mess up badly. They have less control of a situation than we think. Everyone thinks there is no problem until it blows up.


I will explain this very simply in a few steps:


1. Debt levels has been growing world wide as % of GDP.

2. Debt servicing is was manageble because low interest rate. Just a simple local example ... people take on high  debt like buying HDB and condos because they can borrow for under 2%.

3. Govts also borrow heaps in last 10yrs.

4. The US Fed has to do 6 rate hikes as estimated by some economists to quell inflation.

5. It has only done just 2 and the stock market tanked, Sri Lanka economy collapsed, Pakistan has to go to IMF for rescue. 


6. How many dominos will fall if the Fed goes through with all the rate hikes.

7. With inflation surging uncontrollably, the Fed does not even have any options but to go through with it.

[Phoenix]

Yes, we live in uncertain times nowadays, and paradigm of low and even negative rates need to change. 


The days of cheap money for now are numbered and the market is reverting to its mean, and this transition can be quite turbulent especially with excess liquidity
being soaked up.  The days of zero or negative rates were unprecedented and we must prepare to go back to some normalcy with higher interest rates.

Covid has shown the weakness in globalisation and this is being aggravated by the Ukranian conflict.

In the meantime, the Federal Reserve has to deal effectively with the inflation hydra but this will entail a slowing down of the economy during the next few months.

The worrying part is whether there could emerge a black swan event to make things even worse.