It's Different This Time... Right...
📌 Endgame in the economic cycle and illustrating a painful recession
Yields had the opportunity to move and successfully played the 'elastic band' rejection from the inversion in 2019, which despite the length of the global CB combination, can be expressed in no other terms than reckless. FED was obviously aiming for the ideal position (the frontal defence from Fiscal this time around) which is a well known counter when the issue comes from private debt, however they were forced to 'bend the knee'.
Things proceed as follows:
1️⃣ Every other time this happened it ended badly for the global economy via recession. ✅
2️⃣ A Fed that lags and finances the Whitehouse will only add fuel to the flames... "it's different this time". ✅
3️⃣ The longer the delay in USD devaluation from Fed, the worst the blow is going to be in Equity markets. Assuming USD does not devalue materially into 2020 its repo will grow and continue expanding the balance sheet, one way or another eventually this is going to look like Fed has been financing the WhiteHouse and then the game is up. 👈 'we are currently here'
The Whitehouse has decided to follow hyperinflation, Dem voters were naive in this sense and thought they could hold rates lower forever without any consequences. Now we must waste more time pursuing their distant dream that taxation is a solution.
Wishful thinking if you ask me... the kind of overdrafts these governments have run up are several multiples beyond even Piketty's theoretical tax base. This ending of a cycle is a pragmatic demonstration of the lust to keep 'putting it on the card' and leaving private debt problems to future generations because of time being finite.
Finally a notion which carries its own duties:
In a debt crisis, as Japan have known for some 30 years a) you do not want an appreciating currency as the cost of servicing those debts will skyrocket in real terms and b) remain nimble...(get a peloton if necessary).
Thanks as usual for keeping the feedback coming 👍 or 👎
Yields had the opportunity to move and successfully played the 'elastic band' rejection from the inversion in 2019, which despite the length of the global CB combination, can be expressed in no other terms than reckless. FED was obviously aiming for the ideal position (the frontal defence from Fiscal this time around) which is a well known counter when the issue comes from private debt, however they were forced to 'bend the knee'.
Things proceed as follows:
1️⃣ Every other time this happened it ended badly for the global economy via recession. ✅
2️⃣ A Fed that lags and finances the Whitehouse will only add fuel to the flames... "it's different this time". ✅
3️⃣ The longer the delay in USD devaluation from Fed, the worst the blow is going to be in Equity markets. Assuming USD does not devalue materially into 2020 its repo will grow and continue expanding the balance sheet, one way or another eventually this is going to look like Fed has been financing the WhiteHouse and then the game is up. 👈 'we are currently here'
The Whitehouse has decided to follow hyperinflation, Dem voters were naive in this sense and thought they could hold rates lower forever without any consequences. Now we must waste more time pursuing their distant dream that taxation is a solution.
Wishful thinking if you ask me... the kind of overdrafts these governments have run up are several multiples beyond even Piketty's theoretical tax base. This ending of a cycle is a pragmatic demonstration of the lust to keep 'putting it on the card' and leaving private debt problems to future generations because of time being finite.
Finally a notion which carries its own duties:
In a debt crisis, as Japan have known for some 30 years a) you do not want an appreciating currency as the cost of servicing those debts will skyrocket in real terms and b) remain nimble...(get a peloton if necessary).
Thanks as usual for keeping the feedback coming 👍 or 👎
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