
The Swiss View: Banks in Hot Water
Many people are worried that we are back at the Great Financial Crisis. While we are convinced that history does not repeat itself, it often rhymes. The risks that result out of central banks rising interest rates in light-speed are not new. We believe that the decision of the central banks to raise interest rates has been the right one but that they clearly underestimated the inflation and thus started too late. However, not only was it a misjudgment of inflation rates, it was also a misjudgment that the Modern Monetary Theory could work. That is something we and many others have warned from repeatedly. After more than a decade of ultra-low interest rates, many market participants have forgotten how to behave in an environment of rising interest rates.