The grand experiment of central banks to borrow their way to growth may be headed for implosion.<\/p>\n
The record expansion in debt across the globe \u2014 a stunning $57 trillion since 2007, when the financial crisis erupted \u2014 is shattering market confidence and choking prosperity at home as the Fed threatens higher interest rates and Europe engages in its own round of quantitative easing, according to many Wall Street analysts.<\/p>\n
\u201cThe debts grow larger and larger because of our ability to postpone the consequences \u2014 and we are rapidly approaching the crisis that will dwarf the crisis in 2007 and 2008,\u201d said market pundit Peter Schiff, CEO at Euro Pacific Capital.<\/p>\n
\u201cThe only way we are able to stay ahead is by reducing interest rates and by having the Federal Reserve monetize debt,\u201d he added<\/p>\n
And with talk of raising rates at the Fed, the losers are already piling up.<\/p>\n
Big institutional investors were licking their wounds earlier this month. Government bond yields plunged to all-time lows in the eurozone \u2014 dampening returns \u2014 after the European Central Bank began buying government debt and other bonds. It did so in a US-style $60 billion monthly quantitative easing program aimed at inflating Europe\u2019s struggling economies.<\/p>\n
The US debt markets are not doing much better. US Treasury yields have trended lower as investors vainly chase them for better returns. Corporate debt markets are also being battered by a rash of bad economic indicators \u2014 such as retail sales falling the last three months \u2014 showing that the astronomical debt burden has produced little economic growth.<\/p>\n