After nearly three decades of monetary central planning, the bonds pits and other financial markets are powder kegs. Asset prices have been so drastically and systematically falsified that they are vulnerable to sudden implosions when exogenous events finally dislodge the Big Fat Thumb of central bank control.
That’s the lesson of the current raging political and financial crisis in Italy. During the four years after May 2104, the ECB’s balance sheet went parabolic — rising by the staggering sum of $3 trillion or 130% and vacuuming-up $300 billion of Italian government debt as it did.
Yet the better part of four years of yield suppression owing to Mighty Mario’s Mega-QE — which at one point absurdly took the Italian 10-year yield inside 1.00% — has essentially been wiped out in just 16 trading days since May 7.