We’ve witnessed since March 2020 a QE program that, rather than accommodating deleveraging, actually spurred further, dangerous, speculative leverage.
The week had an ominous feel. en-year Treasury yields dropped another seven bps to 1.29% – completely disregarding much stronger-than-expected reports on consumer and producer prices. Treasury market notwithstanding, inflation has become a problem in more ways than one.
If leveraged speculators get hammered in Chinese bonds, they’ll be forced to slash risk elsewhere.
There is a monumental flaw in contemporary central banking doctrine, one not debated and seemingly not even recognized: it is perilous for central banks to manipulate the securities markets as their chief mechanism for managing financial conditions.
It was a fascinating set up. A pivotal FOMC meeting two days ahead of quarterly “quadruple witch” expiration of options and other derivatives. Option expiration-related volatility used to be largely confined to the equities market. But with ETFs tak…
It’s right there in the data: one of history’s most spectacular monetary inflations and asset Bubbles.
Chamber of Commerce data and comments corroborate myriad anecdotes of an increasingly unbalanced and overheated economy suffering from bottlenecks, supply chain issues and shortages (including labor). But here’s what the Fed is really afraid of.
Bubble risks will not be resolved. Unprecedented Credit growth. An epic cycle extended by increasingly intrusive government intervention and monetary stimulus. Deepening economic maladjustment. Monetary Disorder. There are clear and ominous parallels to the “Roaring Twenties” – today in China, the U.S. and globally.
The Fed and market pundits stick blindly to the assertion “inflation expectations will remain well anchored” – assuring the bond market, dovish Fed policies and the great bull market are all equally well anchored. Yet this is not an environment where anything is securely anchored.
There is an overarching issue I haven’t been able to get off my mind: Are we at the beginning of a new cycle or in the waning days of the previous multi-decade cycle?