A loyal reader asked a pointed question: is this the worst market mispricing ever? (Thanks AKOC).
Perhaps it is. Why?
Because the entire global economy is grossly overleveraged on a fundamental basis.
When we think of markets and leverage we think of margin debt, derivatives, corporate debt, etc. This was certainly the case in 2007-10 during the Great Debt Crisis, which was "resolved" when the US and EU central banks and governments stepped in and assumed the debt. Private sector debt became government debt, with lots of it sitting in central bank balance sheets. The problem was - literally - papered over.
Then came deflation (thank you China and you cheap manufacturing juggernaut), interest rates went to zero or lower, and for almost a decade everyone forgot that debt carries a servicing cost (interest). Even the worst serial bankrupt in Europe came back and tapped markets for fresh debt (Greece). It had to mortgage its silverware for 99 years, but.. it did.
COVID changed everything: American, European and Japanese governments panicked and printed money like never before. They made 2008-10 QE look like a statistical aberration by comparison (see charts below).