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Trump Closes The Loop, Calls On Fed To Cut Rates, Restart QE
Well, it's official. The loop has been closed.
Donald Trump is now calling for the Fed to cut rates, stop balance sheet runoff and, crucially, resume QE. By definition, that means he's explicitly calling for Jerome Powell to monetize the debt he (Trump) is issuing to fund the tax cuts and the fiscal push.
This was always the logical (or "illogical" depending on how you want to look at things) next step for a president who has gone out of his way to encroach on central bank independence and ot
I love that banner
Yes, genius.
Also, if MBS purchases had more of a market impact than treasury purchases, than swapping out long duration MBS for short duration treasuries is in fact QT lite, not QE lite! McElligot recognizes that in the linked post, but no one else seems to…
political things…he now has an entire year to constantly harangue mexico about the border. the goals to met regardingthe border are unacievable as they are unquantifiable…which is exactly how he wants it. the only goal is to have a talking point/scare tactic had can roll out at will right into the teeth of the election cycle.
same idea with china trade…just drag it out but always making progress. china doesnt care either as they need to plan for a big 2020/2021, 100 years of the chinese communist party…to celebrate i am sure there will be plenty of stimulus and liquidity AT THAT TIME..too early and the partys over.
the reason the gop says nothing and few people believe anyone wanring that this is not a smooth sustainable path…is b/c it appears running deficits have no negative impact.. that doing QE has had no negative impact that regular people can see and that few can tell the tale of how it could end up, or shocks that may occur along the way.
wage earning people cannot see that the rocket he refers to is the prices of assets…not wage pressures, not housing affordability, etc. our system currently takes more and more of those wages and puts it into financial markets that push prices up…furthur distancing a wage earner from ever being able to accumulate any of said assets.
I dont know where or when this is going to break. real estate seemed obvious in 2007; tech was apprarant in 1999; today i cant see the obivous thing….unless the bubble is so big its everything everwhere…the only question is will djt be holding the bag when it pops.
If you’re looking for the bubble this go around look no further than corporate balance sheets. Even more ominous is the potential for the bubble to be lurking in the sovereign debt market. You can now be the proud owner of a Greek 10-Year bond that pays you.. 3.5%
The sovereign debt bubble is so large it really is everywhere. It remains the benchmark for all asset prices so by the transitive property an overvalued government bond leads to overvaluation in all other asset prices.
Ok, so next let’s look for signs the world has had enough of the irresponsible BS and moves to shift away from USD as world reserve. If that happens, we’re gonna have some real problems with EM currencies.
What will break first, HY bonds or EM/USD?
If I were to wager a guess, i’d say the next crisis starts in currency markets. The world hasn’t seen a serious currency crisis in quite some time (outside a few select with limited global impact like TRY)
U.S. fiscal and monetary policy is the equivalent of an obese drunk man maxing out his credit cards to buy Bitcoins that he uses to order speedballs to postpone a hangover headache, and then bashing his head against the wall for exercise and the adrenaline rush. I mean, for the first few days it’s fun…