05/15/2017 - Martin Armstrong: The Coming Central Bank Crisis
“I have warned that whenever a government creates a solution to any crisis, that solution becomes the next crisis. This is what I have called the Paradox of Solution.The unfolding of the exit of the central banks from the Quantitative Easing monetary policy will become a much more serious threat to the financial markets than anyone suspects .. The real problem lies with the European Central Bank (ECB) and the Japanese central bank and when they exit their Quantitative Easing programs, their economies are not the reserve currency and lack a solid bid from international capital. The end of QE will lead to a sharp increase in yields on the bond markets, and thus the financing costs for the states will explode far more rapidly today than at any time in past history. It is also possible that other sectors of the financial system, such as the stock markets and the foreign exchange markets in peripheral economies to the USA, will be cast into turmoil experiencing great difficulties without the financial support of the central banks .. The crisis emerges when governments, who are the ones who have been subsidized since 2008, find no bid for their paper. This will really send rates upward at a rapid pace .. The balance sheets of both the Japanese central bank and the ECB are unlikely to follow the Fed just yet. A withdrawal of the ECB’s purchases of securities could produced the most widespread damage in Europe since the Dark Ages.”
