In an essay titled “The Doom Loop,” published Wednesday, Hayes argued that the West’s decision to freeze Russia’s forex reserves and push the country out of the global payments messaging system SWIFT has set the stage for a so-called doom loop where the current account surplus nations stop investing in dollar-denominated assets like Treasuries and move into bitcoin and gold.
Countries running current account surplus are net lenders, meaning they park their money into bonds of other nations, helping finance their fiscal deficits.
would have to finance its deficit via domestic lenders or have the central bank print money and buy the government debt, according to Hayes, who pleaded guilty to violating the U.S.
According to Hayes, the Fed would be forced to launch yield curve control , a sort of perpetual QE, which involves targeting a longer-term bond yield by a central bank, then buying or selling as many bonds as necessary to hit that objective.
There is no other politically palatable option, and the actions against Russia all but assure that YCC is coming sooner than you think,” Hayes noted.
“The ECB is trapped, the EU is finished, and within the decade we will be trading Lira, Drachmas, and Deutschmarks once more.” Hayes wrote.
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