‘The Impact Of The Fed’s Reversal Has Been Tremendous’: BlackRock’s Rieder Talks Shop With Goldman
What else can be said about the Fed's "epochal"/"epic"/"dramatic" dovish pivot which turbocharged the bounce off the December lows on the way to catalyzing the best start to a year for equities since 1987?
Well, not much, probably.
From the moment Jerome Powell "figured it out" in Atlanta on January 4 (while seated next to his predecessors) to the day the Fed enshrined three weeks' worth of conciliatory, market-friendly messaging in official policy via a pair of overtly dovish statements whi
Here’s what Reider, Hantzius, and all the other masters of the universe won’t say (in plain English): the American economy — the global economy — is a giant debt-fueled Ponzi scheme one major exogenous event from collapse.
It’s ultimately a problem of unproductive debt to reinforce vicious economic deflation. And for China, I think it’s more likely to be an endogenous crisis rather than an exogenous one.
No it’s not.
I mean, yes, it’s debt-fueled, but do you have any idea how much money has been lost by people who have relied on that “one major exogenous event from collapse” narrative since the crisis?
It’s silly. And to a certain extent, it’s meaningless. In the grand scheme of things, the entire world is “one major exogenous event from collapse”. For example, an asteroid could end this whole thing tomorrow. I could be the victim of an “exogenous” event (e.g., a bus t-bones me trying to get through an intersection) tomorrow and I’d be dead. North Korea could nuke Tokyo over the weekend. And on and on and on.
What “one major exogenous event” can you name that would single-handedly collapse your “giant, debt-fueled Ponzi scheme”?
What is the single catalyst that would all at once overwhelm policymakers’ ability to drown it in liquidity?
When Bernanke said printing money wouldn’t cause inflation, was he right, or were all those people who penned that open letter to him right to say that QE was going to spark hyperinflation? (you don’t even have to Google it, I’ll spoil it for you: Bernanke was right).
The point is, if I wanted to, I could spend all day cranking out different versions of that “it’s all a Ponzi scheme!!!” story and make millions in clickbait ad money. And I could use that money to then pay for ad space on other sites, so you’d see my stories pop up at the bottom of those sites with headlines like “This Is The Event That Will Collapse The Global Ponzi Scheme”.
But that would be stupid, wouldn’t it? Yes, it would. Because saying that is like saying “This Is The Day When The Asteroid Is Going To Hit.” Sure, I might accidentally get it right and pick the day when we go the way of the dinosaurs, but probably not.
Rather, what I’ll probably end up doing in that scenario is just come away looking like a moron, just like every doomsday blogger has come away looking like a moron every single day since the crisis.
Of course not really, because there’s nothing “moronic” about duping idiots for millions in click bait money and then plowing that money into the very same assets they’re telling you to sell because they damn well know that the asteroid isn’t coming, right?
Right.
No one’s asking you to crank out clickbait — we respect you too much, and that’s not why we’re here. And yes, yes, of course the CBs can drown the next clusterfuck in liquidity — that’s what they did in 2008 (and saved the system, although you won’t find a conservative or Republican who would admit as much). But, and I think this is a totally valid question, at what point does the rubber band snap? It didn’t in 2008, but it did in Germany in 1923 and it did in 1932 here and in much of the developed world, and those epic failures — collapses? — brought us national socialism, japanese miliitarism, and the worst calamity the world has ever seen. So, yes, i have some confidence that CBs can keep kicking the can down the road — until they can’t.
Here’s what I’d like to ask you to address. I read so much about Powell’s dovish pivot. There is no question he has changed his tune. And various Fed governors have also adopted a very dovish tone. And the fed isn’t raising rates. But are they really following through on their promises to ease off QT. I check the Fed balance sheet report every week. For the last 4 reported weeks, from Jan 23 to Feb 28, they have continued to reduce the balance sheet. I see a reduction of about $73 billion during that time frame. Here’s the site I check. You can see it best if you pick “total assets” and use a 3 month period:
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
So the talk is really dovish. And the market and Trump love the way he talks. But the Fed seems to be trimming the balance sheet in the past four weeks at least as fast as it was the prior few months. What’s the deal?
The FED never said that QT has already stopped. Actually in the last minutes (end January) it was written that QT will stop late 2019. Forecasts are for a reduction of another 300-400 bn $, mainly in ABS.
For the moment it has paused rate hikes. Only later it will pause the QT. You can see this as going from a strong tightening to a mild tightening.
Depending on how the macroeconomic situation will evolve, it’s possible it will stop the QT sooner and even start a new QE, maybe already in 2020.
Did Mr. Rieder just say “this time is different”????
Rick Rieder: I think the nature of today’s economy has made boom/bust business cycles a thing of the past. In goods-oriented economies driven by manufacturing, chemicals, and energy you’d close the output gap, create inflation, and then force the system to recalibrate. Today, we have a services-oriented economy driven by technology, education, healthcare, etc., in which these dynamics just aren’t relevant.
The SA
Yes he did imply though not explicitly, that this time is different.IMHO. May be he is right in the short term.