If I’m reading it correctly another GFC is coming and the FED might just do more QE to make the mess even bigger.
I would value your assessment of this article.
Bob
The FED continues from behind the scenes
The Fed has set a number of precedents that have stimulated the asset markets, and continue to do so. The Fed has worked to essentially guarantee every financial sector against catastrophe and many of the traditional corrective mechanisms no longer exist. That doesn’t mean certain sectors won’t face hardship.
Let’s look at the commercial real estate sector. It seems that the FED has determined that office building value devaluation is not an existential banking system threat. However, since the FED has already effectively guaranteed every dollar of bank deposits and has rendered the FDIC an anachronism, the FED has worked to make certain there is no Lehman style knockoff effects, because of any falling commercial RE values.
Will the dollar collapse?
As for the dollar collapsing against other currencies, I can tell my reader flat out that this won’t happen anymore. The US produces so much energy that missiles could drop on DC and people would still need dollars. The USD has been collapsing for decades, but there won’t be a relative collapse. All the economies and currencies are joined at the hip.
Here’s the non sequitur of the gold community. They predict a dollar collapse, while gold will move much higher, but asset prices will drop. That line of reasoning is pre-2008.
I submit to my readers that there is an ongoing currency collapse of about 6 to 8% a year, which is forcing gold to trend higher with asset prices moving up as well. This is different than pre-GFC.
Ben Bernanke’s vision
There was a reason why commodities and the general price inflation growth levels were falling all last decade. QE was operating as intended. Fiscal deficits were relatively restrained, the governing authorities feigned fiscal prudence, and the amount of debt servicing outstanding was a restraining mechanism that kept price inflation in check.
This was the scenario envisioned by Ben Bernanke. As the economy devoted an ever greater portion of its output to servicing outstanding interest, this debt servicing acted as a release valve and help to curtail inflationary economic growth and overall aggregate economic demand.
Before and after COVID-19
The financial system’s experience with QE could be considered a bifurcated one. The first segment pertained to QE prior to COVID and the resulting stimulus and backstopping, while the second segment pertains to post March 2020.
I see little restraint anymore, nor do I see any bona fide desire by the monetary and fiscal authorities to do anything about it. However, based on prior behavior, the FED stands ready to backstop when needed. If the Fed weren’t back stopping in its manifold ways, the yield curve would already be pushed up much higher. The fact that real yields are this low is a testament to the Fed’s behind the scenes success.
I recall back in the early ’90s when the long bond briefly moved above an 8% yield. Back then, inflationary pressures were similar to what we see today, yet the 30-year Treasury is yielding just over 5%. Who says yield curve control isn’t in effect as we speak?
False binaries and old school analysis
I appreciate this gentleman’s analysis, but it is kind of the old school type of stuff that would appear on the gold websites. A lot has changed since 2008 and a lot has changed since 2020.
Other than for maintaining social stability, the monetary and fiscal authorities truly no longer care about inflation and the ramifications it has on its emotionally charged, cognitively stunted, highly fractured, and heterogeneous citizenry. They just tell the average person that they care.
Moreover I can easily make a case that can determine that the monetary authorities actually desire inflation. The reason why asset prices continue to escalate is because, increasingly so, more and more investors are reaching the same conclusion I first made in early 2020.
In a world that is quickly resembling a Soylent Green scenario, the heterogeneous and childlike consumers are price takers and have no power. Welcome to the New World Order.
I did notice Treasury intervened in the Yen markets. Japan has been wobbly for a while now.
There will be intervention as needed. Intervention can go on until that proverbial event that will change the current order.
The New World Order engineers view today’s fiscal and monetary policies as being operated by the law of the jungle.
After the Great Reset, the rule of law will govern the conduct of nations.
“We have before us the opportunity to forge for ourselves and for future generations, a new world order .
“A world where the rule of law, not the law of the jungle, governs the conduct of nations.
“A new world order.”
President and former CIA Director, George Herbert Walker Bush
OK so it’s just business as usual for the forseeable future, more or less?
It does seem they could “pull the plug” if they wanted to, to intensify the force majere. Do you have any thoughts on that aspect of it?
Thank you for taking the time to respond!
Nothing to add here. Time will tell.