A new financial crisis looms

The hope that in the face of weakening economies interest rates and bond yields will decline is wrong. They are still rising in the Eurozone and Japan, leading to a new wave of financial instability.

Over the last ninety years there has been a growing belief held by macroeconomists and investment strategists that interest rates and bond yields are under the control of central bank monetary policies.

It has its origins in the Keynesian-inspired role of governments using deficit spending and interest rates to stimulate economic activity when the private sector suffers a downturn. However, this is one of the fundamental errors of macroeconomic beliefs as we are about to find out.