One Bank Sees ‘Ominous Signs For The World’s Most Important Financial Institutions’
Listen, Nedbank's Neel Heyenke and Mehul Daya are going to make you people understand that this is all about dollar liquidity (or, more to the point, a lack thereof) if they have to figuratively kick down your office door and pull up the charts for you on your own terminal, ok?
When last we checked in on Neel and Mehul, the duo was busy providing what served as evidence of some of the points made by the RBI's Urjit Patel in an Op-Ed for FT.
In that Op-Ed, Patel implored the Fed to consider
It seems to me that a deficit-funded tax cut for America’s wealthy should have roughly 0 impact on growth or dollar liquidity (in the short term). The government returns money to wealthy taxpayers (relative to the previous baseline), and because those taxpayers are wealthy, they save the money. By…buying the additional debt issued by the government to fund the tax cuts. All that’s happening is assets are created on the balance sheets of wealthy households while liabilities are created on the government’s balance sheet. Now, obviously I’m ignoring cross-border flows and making assumptions about where tax savers will put their money, but I think once you walk through the ramifications of what happens once those assumptions are changed, the net result is essentially the same. Thoughts?
Of course, the long-run effects are negative as the government has to issue additional debt to support interest payments.
Time cash out of the market, buy some US treasuries at a discount, and then wait for another blowup-cum-QE event from the Fed to reinvest at another all-time market low!
Inflation is coming my ass