Why have Treasury and global bond yields been collapsing in the face of surging inflation? The faltering Chinese Bubble. The Faltering Chinese Bubble! Fragile global Bubbles!!! “Hey Doug, you’re on mute.”
Hey, let’s give ourselves permission to print trillions and trillions anytime we want. Yeah, unelected Capitalist.
We’ve witnessed since March 2020 a QE program that, rather than accommodating deleveraging, actually spurred further speculative leverage.
The Fed basically risked everything. They thought the changing world meant no more worries of surging inflation and actual tightening measures. Keeping the markets elevated became their unstated priority. They’re now on the wrong side of a losing bet, a predicament that became increasingly clear this week with Chair Powell’s beltway testimony. The Fed, understandably, is Under Fire for surging inflation.
And today, Americans think the stock market will return 17% long-term…(face palm).
It was not the Federal Reserve flinching this time, it was China’s central bank that caused the bounce on Friday.
The first 3 paragraphs of Doug’s article tell it all.
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.
The bottom line: global Bubbles are fragile and increasingly vulnerable. In particular, China is a Credit accident in the making. And Fed policy certainty has been the glue holding things together – keeping the mania raging, keeping the leveraged players playing, keeping all the options and derivatives speculators betting on the long side, and keeping the weak dollar supportive of levered “carry trades” the world over.
I am going to pull the salient data out and print it up front… So my more simple conclusion is that our financial system is FUBAR.