Swimming in stormy waters

For the past three years, especially since the collapse of US tech mania, the world has benefited from a massive credit boom, brought about by the central banks’ easy money policy. While the US Fed has raised interest rates to double what they were a couple of years ago, it is still maintaining low (inflation-adjusted) real interest rates. So low, that in fact, rates on the US Dollar are now at zero. This environment, coupled with ten years of easy money policy in Japan, has allowed for a new kind of bubble to develop, one which has enabled low-quality corporate and sovereign issuers to have unprecedented access to the credit markets. This liquidity orgy has, among other things, allowed the equity markets to stay afloat, although they appeared to peak in early May, when two major issuers, Ford and GM were downgraded to Junk. In the two previous years, the