British economics writer Ambrose Evans-Pritchard is worried that the debt cycle is about to turn as inflationary pressures finally hit the US market. A rise in interest rates could set off a cycle of risk feedback loop in the debt markets that might cause another global financial crisis due to a liquidity mismatch. In other words, when the squeeze comes, everyone is going to sell their shares in debt funds. The funds, in turn, will not be able to sell the bonds the funds own as quickly as the investors want their cash causing those bonds to crash in value.

It’s legitimate concern. Unfortunately, Evans-Pritchard tries to spice up his lead with some hand-waving about Bitcoin after some silly nonsense about the art market.

What is striking about the Christie’s soiree in New York last week was not so much the $450m paid for his rediscovered Salvator Mundi but the prices fetched by everyone else. Buyers forked out $46m for vermilion spirals from the Bacchus series by Cy Twombly, executed 12 years ago with a paint-drenched brush on a pole. Soothing sands called Saffron by Mark Rothko fetched $32m. The week’s haul at Christie’s and Sotheby’s topped $1.5bn, with Asian buyers snapping up Monets. Fernand Leger’s abstract Contrastes de Formes fetched $62m.

It screams late-cycle liquidity, recalling Japan’s impressionist fever in the late Eighties before the Nikkei collapsed and the bottom fell out of the art market.

Actually, it doesn’t. The worst excesses of art prices—the Leonardo notwithstanding—are behind us. As a measure of excess liquidity, the art sales of 2013-2015 were the comparables to Japan’s Impressionist buying binge which peaked in May 1990. What followed was the Iraqi invasion of Kuwait which set off a global recessionary shock that burst the Japanese bubble.

Art auctions ring the bell for peak global liquidity (Telegraph)