Esther George could not have been much clearer. Inflation is too high and must come down. Financial conditions must tighten, and financial markets are a key monetary policy transmission mechanism. And the Fed today has little clarity on how far this tightening process will need to go.
Global Bubble deflation gathered additional momentum this week. The U.S./global tech Bubble collapse accelerated. Hit by panic “runs”, the historic cryptocurrency mania is coming completely unglued. And even more historic Chinese apartment, financia…
The Global Bubble, several decades in the making, is in the process of bursting. A new cycle is emerging, replete with extraordinary uncertainties. Acute instability has become a permanent feature, at least through the cycle transition phase. These …
Markets could soon be clamoring for assurances of the Fed’s “buyer of last resort” liquidity backstop, while our central bank is preparing to begin withdrawing liquidity by selling Treasuries and MBS.
It increasingly appears the world has reached a critical historic juncture – the transition away from an unparalleled market, financial and economic up-cycle.
A $95 billion monthly reduction of assets (removal of monetary stimulus) would be a case of the Fed Playing with Fire.
Inflation, a Hawkish Fed, Spiking Bond Yields, War, China and Acute Instability. Where to begin? When it appeared less likely the War was spiraling out of control, it was time to squeeze the shorts and force an unwind of bearish derivative positions. Longer-term developments – including a momentous reshaping of the “world order” – are essentially irrelevant to stocks.
Only the Fed’s balance sheet has the capacity to operate as “buyer of last resort” in the event of serious de-risking/deleveraging. But with today’s powerful inflationary biases in consumer and producer prices, wages, and energy, food and global commodities markets, another bout of monetary inflation risks general inflation spiraling completely out of control.
Market dynamics suggest a fundamental secular change in commodities derivative markets… This points to powerful inflationary biases throughout the commodities universe. Moreover, central banks risk throwing gas on an inflationary fire when they respond to financial market illiquidity with additional QE/monetary inflation.
A key question is whether this secular shift in commodities markets portends a secular cycle downturn for financial assets? I believe it does.
Contemporary finance showed its Ugly side. Acute instability is worrying, to say the least.
