Carry Trades and Volatility Shocks
Update: 2022-02-24
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Tim explains that carry trades (borrowing at low interest rates to finance higher-yield investments, and assuming market stability), are behind recurring booms and busts. Tim and his fellow authors argue that market crashes are not the result of economic recessions – rather, market crashes cause recessions.
Currently, there is risk of another carry crash, which was in development before the Russia-Ukraine crisis.
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