01/12/17

Bubble Watch: US Margin Debt Now Equal the Economy of Taiwan



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Bubble Watch: US Margin Debt Now Equal the Economy of Taiwan
// Zero Hedge

When Central Banks attempted to corner the sovereign bond market via ZIRP and QE, they forced ALL risk in the financial system to adjust lower.

Remember, in a fiat-based monetary system such as the one used by the world today, sovereign bonds NOT gold are the ultimate backstop for the financial system.

And for the US, which controls the reserve currency of the world, sovereign bonds, also called Treasuries, represent the "risk-free" rate of return for the entire world.

So when the Fed moved to corner this market, forcing the yields on these bonds to drop to all-time lows, it was effectively forcing ALL risk in the US financial system to adjust to an abnormal risk-profile.

Put simply, the Fed created a bubble in bonds, which in turn fueled a bubble in everything.

Yes, everything… corporate bonds, municipal bonds, stocks, even consumer credit. Indeed, nine years into this insanity things have reach such egregious levels of excess that even tertiary debt instruments such as margin debt have reached levels greater than ever before.

What is margin debt?

Margin debt is money that stock investors borrow in order to ......

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