“Bubbles go to unimaginable extremes – then double.” “Quadruple” seems more applicable these days.
Markets are said to hate Uncertainty. Yet stock prices rise to unprecedented heights in the face of myriad extraordinary uncertainties. The current course of experimental monetary inflation and fiscal stimulus creates epic Uncertainty. The course of China’s historic Bubble is similarly unsettled. The geopolitical backdrop points to alarming instability. Yet global climate change poses the greatest threat to all aspects of human life, starting with economic, social, political and geopolitical stability.
To believe the Fed can simply accommodate the financial markets with the most gradual and transparent “taper” and everything will magically normalize is more than wishful thinking.
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.