WORLD LIQUIDITY CRISIS? (WE ARE IN ONE).

By Gregory Mannarino

WORLD LIQUIDITY CRISIS?

(WE ARE IN ONE).

By Gregory Mannarino TradersChoice.net

In finance, liquidity generally refers to the ease of which any asset can be converted into cash.

On a macro scale, economically, LIQUIDITY IS THE BACKBONE OF THE SYSTEM. The flow of credit, also known as debt, through an economy is the single factor which allows the economy to function. EVERYTHING depends on the continual flow of credit/debt through the system. IF the flow of credit/debt through an economy is interrupted, THEN ALL TRANSACTIONS STOP.

The very nature of the modern central bank run debt-based system is this: IT CAN ONLY OPERATE AS LONG AS THE SYSTEM IS FUELED WITH MORE DEBT. This system therefore can only function in a continual black hole. It is precisely this black hole vacuum of relentless debt creation which continually demands even more debt creation 24 hours a day, 365 days a year, PERPETUALLY.

This debt based central bank managed mechanism in and of itself, which is responsible for relentless debt creation and therefore currency debasement, is why the world today, (and the people of the world), stand at a tipping point… and WE HAVE A PROBLEM.

A PARADOX.

Global debt is skyrocketing at a pace which has never been seen before meanwhile, there is not enough of it, THAT IS THE PARADOX.

The mechanism of relentless debt creation must expand exponentially simply to allow the system to function at its current level. By inflating global debt, currency debasement speeds up. The effect of currency debasement is also accelerated by artificially suppressed rates. Artificially suppressed rates and therefore currency purchasing power losses allows a central bank to create more currency, as it now takes more weaker currency to buy any goods and services. Currency creation is an integral component of central banks inflating the system. Central banks have ONLY ONE PRODUCT, debt, and the more debt any central bank is allowed to create or is called on to issue, the stronger they become.

An example of a central bank being “called upon” to issue more debt would be if a politician were to call on a central bank to lower rates, or even perhaps lower rates to negative.

Over the last week, world debt markets have seen MASSIVE capital outflows. These capital outflows have caused bond yields to rise sharply. Here in the US, the benchmark 10-year yield spiked rapidly which sparked a sell-off in the US, and world stock markets.

Regarding world stock and debt markets, they are on a direct collision course. Without more debt creation/buying by central banks, the stock markets of the world will drop substantially.

World stock markets today function ONLY AS A DERIVATIVE of action in the debt market. Stock markets functioning as a derivative means that world stock markets are deriving value only from easy money policy, debt creation, and currency debasement.

IF central banks do not act IMMEDIATELY to stop the current sell-off in world debt markets, the stock markets of the world will fall, and could fall dramatically, but that IS NOT THE ISSUE.

The issue is the potential for halting of the flow of credit/debt through the system which would cause a “locking up” of the system itself.