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"The biggest issue is that there is only so much one can squeeze from a debt cycle and most countries are approaching those limits. In other words, they are simultaneously approaching both their debt limits and central banks’ “pushing on a string” limits. Central banks are approaching their “pushing on a string” limits both because interest rates are approaching their maximum lows, and because the effectiveness of QE is approaching its limits as the risk premiums and spreads are compressing. This is a global problem. Japan is closest to its limits, Europe is a step behind it, the US is a step or two behind Europe, and China is a few steps behind the United States. It would only take a 100 basis point rise in Treasury bond yields to trigger the worst price decline in bonds since the 1981 bond market crash. And since those interest rates are embedded in the pricing of all investment assets, that would send them all much lower." From a speech by Ray Dalio of Bridgwater at the 40th Annual Central Banking Seminar (VIEW LINK)


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