Global markets these days have become more and more unpredictable with the US and Chinese stocks' consistent historical upswings and plunges in the past few months. To make things worse, the oil price has hit a six and a half year low. The condition can finally be compared to the days right after the 9/11 attacks.
Jim Reid from Deutsche Bank summarized everyone's worst fear in three sentences.
"One of the biggest problems we face is that there is no historical template for current global market conditions so we're all flying blind to a large degree. Never before have so many of the most important countries in the world printed so much money and left base rates at near zero for so long. Also never before has the largest economy in the world tried to start a slow process of reversing said extraordinary policy."
The Managing Director and Strategist at Deutsche Bank AG, Research Division further said that central banks will be forced to keep cheap currencies flowing because of their fear of what will happen if the currency stops as a result to the fragile finance system along with the poor global growth.
The nightmare began with a fall in Chinese markets first mistaken as a healthy clearing of froth. Yet it has slowly gained momentum as it too affected the American markets. Now it finally looks very worrying. The fear ricocheted all the way to Japan and the European markets.
Nobody knows what will happen if the flow of currency stops. Necessary protocols will battle with another and experts have sought help from history that can help put the market back to its healthy condition.
As of today, no one has the clear answer. Deutsche Bank thinks that keeping monetary conditions loose will go against the inevitability of pull backs and this in itself will become a $10 trillion problem that will essentially hit the bond markets.
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