“It has long been understood that when the government borrows excessively, it pushes up interest rates and crowds out the private sector .. the government’s demand for money will exceed the supply of money from capital inflows and Quantitative Easing. The resulting drain of liquidity is likely to put upward pressure on US interest rates and downward pressure on US asset prices .. Crowding out is back. Liquidity is already negative. Any policy that would make it even more negative could cause a very significant correction in the stock market and the property market, where prices are already very stretched. A combination of policies that produced a much larger liquidity drain would almost certainly cause asset prices to CRASH.”
HEADS UP – we just interviewed Richard and the interview podcast will be posted up shortly ..