Welcome to the Depression: Negative Interest Rate Delay Market Clearing

Central banks have succeeded in preventing a sharp drop in economic activity and the attendant decline in asset prices and employment, but they haven't stopped the underlying economy from deteriorating. Instead of experiencing a sharp recession that cleans out the bad debt, we see data such as new manufacturing orders in the U.S. experience drop similar to the recession of the early 2000s, as well as elevated asset prices which are out of whack with fundamentals.

Bloomberg: Negative Rates Hit Global Shipping Market
The monetary policy environment “means that consolidation will be much slower because it’s easy for banks to keep weak shipping companies above water,” Nils Smedegaard Andersen, chief executive officer of A.P. Moeller-Maersk A/S, said in an interview.

Bloomberg: IMF Urges Action as Negative Rates Infect Danish Property Market
After almost four years of negative interest rates, Danish policy makers need to act now to prevent a housing bubble, according to the International Monetary Fund.

“We strongly encourage the authorities to take early action to lean against the wind on house price increases,” David Hofman, IMF mission chief to Denmark, said in an interview. “We see a need for action on a number of points.”

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