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I baited you into talking to me once since you put me on (Ignore). And I got nigh on 28 stacks of High Society and counting. When I get to 30 stacks of High Society I'll thread it and we shall see if you can maintain decorum.
Let us proceed...
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I baited you into talking to me once since you put me on (Ignore). And I got nigh on 28 stacks of High Society and counting. When I get to 30 stacks of High Society I'll thread it and we shall see if you can maintain decorum.
Let us proceed...
whine hole, stfu, nobody but you cares who you are ignoring
Fed signals tightening
https://www.cnbc.com/2021/12/15/fed-...next-year.htmlThe Federal Reserve provided multiple indications Wednesday that its run of ultra-easy policy since the beginning of the Covid pandemic is coming to a close, making aggressive policy moves in response to rising inflation.
For one, the central bank said it will accelerate the reduction of its monthly bond purchases.
The Fed will be buying $60 billion of bonds each month starting in January, half the level prior to the November taper and $30 billion less than it had been buying in December. The Fed was tapering by $15 billion a month in November, doubled that in December, then will accelerate the reduction further come 2022.
After that wraps up, in late winter or early spring, the central bank expects to start raising interest rates, which were held steady at this week’s meeting.
Projections released Wednesday indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and two more in 2024.
The Fed will be buying $60 billion of bonds each month starting in January
lol tightening
tapering.
If there are rate hikes that would be tightening.
The notion that QE and ZIRP were necessary only to muddle through a recession is a fiction. They're crutches now. Removing the QE punch bowl or raising fates would cause a politically unsustainable recession for whoever happened to be in charge.
Bad as QE was at its intended aim (stimulating economic demand; it's main effect has been to push investment into riskier asset-classes), reversing it too quickly could be really bad. The Fed's declared plan isn't too different from the BofE's, described below.
https://www.taxresearch.org.uk/Blog/...ould-be-worse/The QE programme has come to an end. The total government cash requirement is to be funded by financial markets. And, in addition, QE may begin to be unwound. This means that the Bank of England will not repurchase gilts when those it owns are redeemed. It owns 33% of all gilts right now.
What this means is, broadly speaking (and all the figures are estimates, so broadly speaking is good enough) that in 2022/23 the financial markets will have to fund £100 billion of gilt purchases and at the same time the Bank of England will withdraw over £35 million from that market. That means there will be a cash call on U.K. financial markets of around £140 billion when over the last two years there has been none, in effect.
This is a seismic change to funding. More than 6% of UK GDP is going to be required by government to be withdrawn from effective money supply. What are the consequences?
Candidly, who knows?
We can be sure that the policy is deliberately designed to push down government bond prices by increasing the number of gilts available to the market. The result will be increasing interest rates. That much is predictable.
It is also predictable that without a change in policy more than £100 billion is going to be withdrawn from financial markets over the following few years.
Apart from increasing interest rates no one can be sure what the consequence of this is. But, given that QE was always intended to push investor funds into riskier assets, and this has clearly happened, what we can reasonably expect is a reversal of this trend. There will be sales of riskier assets. In fact, those sales could be significant. The £140 billion required in the coming year has to come from somewhere within the financial system, and they do not create the money to fund this.
What this might mean is three things. First, there will be net selling markets in riskier assets.
Second, net selling markets reduce prices at the margin.
Third, markets are valued at marginal prices, meaning that the overall sense of well-being amongst those with assets will fall.
Which assets are likely to fall in value? Gilts will, of course. But so too will shares. Corporate bonds will also fall as interest rates rose. And most likely house prices will too as the stimulus has also ended there.
Summarise this, and the massive reversal of economic policy that the end of QE, rising interest rates, and QE reversal simultaneously represent look likely to create a significant fall in assets values, across the board in the UK, with the US looking likely to do much the same.
Corporate profits will fall as a result as pension deficits rise. Real investment will fall in the economy.
But what else happens? In effect, liquidity dries up. Because prices in markets are expected to fall no one wants to buy. So prices fall again. Or, alternatively, markets freeze. Both create chaotic situations. And given the intense financialisation of the UK economy, the result could be chaotic.
There could be banking crises, e.g. because of property price falls, or a stock exchange crash, or a loss of confidence simply leading to an economic downturn.
QE was done in the UK with the aim of inflating asset prices. That was always the wrong thing to do. There was always the better alternative of Green or People’s QE. But QE was done. And now the intention is to reverse it, rapidly. My point is a simple one. Bad as QE was, unwinding it rapidly could be worse and this government and the Bank of England seem unaware of that, which is really quite worrying.
Read more at: https://www.kansascity.com/news/busi...#storylink=cpyIn the summer of 2016, while researching his book “Kochland,” Christopher Leonard interviewed a bond trader who told him a fact that blew his mind. “He said the Federal Reserve had printed 350 years’ worth of money in about four and a half years,” Leonard said. “And that this ‘quan ative easing,’ as the Fed called it, had completely distorted America’s financial markets, widened the gap between the rich and everybody else in this country, and essentially forced banks to make riskier and riskier loans that were imperiling the entire economy.”
Take the example of CALPERS, which is the huge pension fund for public retirees in California. It has billions of dollars in assets and the fund’s managers have to figure out where to invest it to earn money. Before, it could have met all its obligations by simply investing in super-safe Treasury bills. But when rates are at zero, that won’t cut it. So now we are seeing huge pension funds that used to be very conservative finding themselves having to invest in things like corporate junk debt and fracking wells – stuff that used to be the domain of risky speculators on Wall Street
A zombie company is a company that has taken on so much corporate debt that its total profits don’t even cover its interest costs, let alone the underlying debt due at the end of the loan. And we have seen a dramatic increase of zombie companies in America in recent years, all of which are the direct result of Fed policies that make this sort of behavior logical. The proliferation of zombie companies has made corporate debt markets extraordinarily fragile and unstable, very similar to the home loan market in the 2000s. The market for corporate debt in the 2010s was like the market for home loans in the 2000s. It was characterized by an almost pathological optimism, sloppy underwriting, a blind eye to risk, and a seemingly never-ending flow of new money to be lent.
At the time I called it a Chinese-style solution, but perhaps the PRC has just been copying the Fed.
When COVID hit, in March 2020, we saw a home loan-like crisis break out in the corporate debt markets. It was a financial crisis worse than the one in 2008. But the difference was that this time the Fed stepped in more rapidly and with a much larger intervention and instantly bailed out these risky corporate loans it had incentivized over the last decade. A lot of this corporate debt is in the form of leveraged loans, which get packaged and resold just like home loans used to. In 2008, there were CDOs: collateralized debt obligations. In 2020, we had CLOs: collateralized loan obligations. It’s the exact same thing. Wall Street securitizes and bundles up these corporate loans in the same way they did with mortgages. And when COVID hit, everybody knew these corporate loans would go bust, which meant the CLOs would fail, which meant that the banks that owned the CLOs would be put into terrible shape. And it would create economic carnage the government wasn’t willing to accept. And that’s exactly what started to happen in March 2020, at which point the Fed stepped in and directly bought up all this corporate junk debt and the securitized form of this junk debt in the form of the CLOs.
the problem isn't so much inflation as such as asset bubbles created by a decade plus of financial repression and malinvestment.
The Fed has had the luxury to engage in these experiments in money printing because we haven’t seen inflation. But now the bill is coming due. The Fed has tried to create growth by increasing levels of debt for households, governments, corporations; by stoking risky investments in tech stocks, third world debt, all kinds of things. It has been pumping up markets with easy money for a decade. And if it has to tighten because of rising inflation, the markets will react the way they have in the past. To speak in really plain English, it could cause the markets to crash.
It will go away in the 2nd half of this decade. Will be painful for some.
Last edited by SnakeBoy; 02-07-2022 at 02:00 PM.
that's somewhat cryptic.
what will go away and how?
Fixed it
fixed what?
your point is completely unclear.
does this go back to your crank theory that the EU and the PRC will implode and China will become as US vassal state?
Never said that and no
I've never heard anyone say China will become a US vassal state lol. Did you just make that up on your own?
Pretty sure you predicted something of the sort last year, fine by me if you've given it up.
I said China isn't rising they have risen. They've seen their peak.
Zeihan thinks the CCP will collapse, seems a stretch to me or more likely clickbait. Even that isn't "China will become as US vassal state".
Murica is in retreat and it's a good thing. We don't need the old world.
Murica 1st
You still haven't said how you think "it [indefinite pronoun reference] will go away in the 2nd half of this decade"I said China isn't rising they have risen. They've seen their peak.
Zeihan thinks the CCP will collapse, seems a stretch to me or more likely clickbait. Even that isn't "China will become as US vassal state".
Murica is in retreat and it's a good thing. We don't need the old world.
Murica 1st
You're the one who brought "it" up. Why pretend you don't know what "it" is?
You think "it" will never go away, I don't agree. No need to get all pissy about it.
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