Zero chance of the Fed moving to tighten financial conditions in the event of inflation gaining a serious foothold. By that point, bond markets would surely already be in a state of disarray. The FOMC wouldn’t dare tighten.
The U.S., after all, is running unprecedented peacetime deficits, with a new $1.9 TN stimulus package scooting through Congress. This legislation will be followed by what is sure to be a major infrastructure program. There is literally colossal deficits and Treasury issuance as far as the eye can see.
Existing market infrastructure will buckle under tens of millions of synchronized sell orders.
Wall Street, of course, is bewitched by the Fed’s QE. Meanwhile, the Federal Reserve is these days uninterested in assessing either QE’s effects or risks. Observation and evaluation of QE is left to us. Every week, Doug Noland, summarizes the effects and dangers brilliantly.
It was immoral for Bernanke to have slashed savings rates to zero and forced savers into the securities markets. The upshot: Tens of millions of Americans are now actively speculating on ever-rising stock prices. In a system skewed for the “haves” and against the “have-nots,” we’re forced to participate in a speculative Bubble for fear of being the chumps left behind. There will be consequences.
Social media instigating a bloody short squeeze upon the hedge funds. The first month of the new year begins with chaos in our Nation’s Capital and ends with market mania chaos – both manifestations of Acute Monetary Disorder. Society Out of Kilter.
For years now, I’ve listened as Washington politicians and central bankers admit to the obvious – that the trajectory of our federal debt is unsustainable – while invariably arguing it was not the time to be concerned or address it. With Treasuries blowing right through the 100% of GDP milepost – and likely poised to reach 125% within the next year or two – there’s no time like the present to recognize our nation is in serious fiscal trouble.
How enormous will deficits balloon when this historic financial Bubble bursts? Are $5.0 TN annual deficits an unreasonable guesstimate? No worries, apparently. There’s always the “whatever it takes” Federal Reserve balance sheet. In the financial and economic crisis scenario, does the Fed boost Treasury, MBS, corporate bond and EFT purchases to, say, $500 billion monthly?
The Fed-induced Bubble is raging out of control. Monetary Disorder is acute and highly destabilizing. Sustainability must be questioned.
The contrast between the depressing health crisis and booming financial markets could not be more stark. Epic, screwy, crazy. What can we look forward to in 2021?