On The Cusp Of Exposing The Full Iceberg

Financial markets are being pushed and pulled by a variety of cross-currents. Much of the turbulence unfolding is the culmination of imbalances and tensions that have been brewing for many years. Amplified volatility in FX and commodity markets are warning signs. They appear on the cusp of spilling more broadly into other markets, exposing the full size of the iceberg.
The current environment is distinct from the period of 2009-2013 when governments and central banks were quasi-coordinated in providing gargantuan amounts of stimulus, and when the geo-tensions were only chirping modestly. This year, governments and central banks have focused more generally on domestic issues. This is good in theory, but it has splintered coordination into a quasi-fracturing of the global monetary system.
It should be widely known by now that past stimulus measures have ballooned sovereign debt levels and pushed official interest rates toward the zero lower bound; while other policies and regulatory changes have prodigiously distorted and manipulated asset prices and the cost of money. Stimulus, however, is no longer a one-way street.
Diverging policies serve as a trigger for capital flow movements. They are shaking the foundation of capital markets, which in turn is causing second order effects like a mini-contagion. In addition, new and ever-evolving rules for investing and financial transacting have had a deleterious impact on market liquidity that will make the swishing capital flows even more magnified and treacherous for financial markets.

This post was published at Zero Hedge on 09/10/2014.