When central banks hold rates artificially low relative to real conditions, you get predictable distortions:
→ Private sector over-consumes and over-invests
→ Growth and inflation run hot
→ Rates stay pinned but don't normalize
→ Stocks, commodities, hard assets rip
→ Fiat weakens
This playbook works when you're fighting disinflation and below-trend growth. It buys time.
But when market forces finally overwhelm the peg — especially if stimulus was deployed during high inflation and above-trend growth — the deleveraging is brutal.
We're not in a disinflationary regime anymore. We're in a regime where the Fed is behind the curve and the market is starting to price that in. Watch the currency, watch the long end, watch credit spreads.
The setup matters more than the tool.
→ Private sector over-consumes and over-invests
→ Growth and inflation run hot
→ Rates stay pinned but don't normalize
→ Stocks, commodities, hard assets rip
→ Fiat weakens
This playbook works when you're fighting disinflation and below-trend growth. It buys time.
But when market forces finally overwhelm the peg — especially if stimulus was deployed during high inflation and above-trend growth — the deleveraging is brutal.
We're not in a disinflationary regime anymore. We're in a regime where the Fed is behind the curve and the market is starting to price that in. Watch the currency, watch the long end, watch credit spreads.
The setup matters more than the tool.