Why the era of free money is likely coming to a permanent end

Global bond markets are experiencing a significant shift as long-term borrowing costs rise to levels unseen in decades. This video examines the drivers behind these changes, the concept of fiscal dominance, and the potential implications for central bank independence in an era where cheap capital is disappearing.

The current financial landscape is marked by US 30-year Treasury yields reaching 5.2%, a peak not seen since July 2007. Simultaneously, UK gilt yields have climbed to levels absent since 1998, while Japanese bond yields have hit record highs. These movements suggest that global bond market instability is driven by factors beyond simple inflation.

The analysis explores the historical friction between political leaders and central banks, citing instances like Lyndon B. Johnson's physical confrontation with his Fed Chair. It also reviews the 1970s UK economic collapse and the more recent Liz Truss mini-budget crisis. Furthermore, the video investigates how private credit and off-balance-sheet special purpose vehicles are currently fueling the AI boom, while considering the challenges facing incoming Federal Reserve leadership.

Source: This Is Probably Fine!