A Harley Bassman Encore: ‘Rumpelstiltskin At The Fed’
[Editor’s note: The following is from the pen of Harley Bassman, who on Tuesday redistributed a note from his own archive in consideration of recent action from the Fed. If you’re not familiar with Bassman, he (literally) created the MOVE — more here.]
From Harley Bassman
In consideration of the FED's promise to hold rates near zero until late 2022, and to continue QE~ into the indefinite future, today's Commentary has been pulled from my archive as a timely re-issue.
Although first pub
There is also “jubilee,” but this isn’t ancient Babylonia any longer. I estimate the probability of a debt jubilee occurring at 0.01% (to make it non-zero).
Sure, we might still experience two or three quarters of single-digit (at worse) deflation. There might be a crash in commerical real estate. But, the Fed will buy the debt and make the lenders whole. Hell, there’s a $1.8B, unfinished convention center in the city I live in. Not sure if the City/Convention-taxing district issued bonds for it (they must have). There is maybe 5% of the estimated revenue now. Their will be a default. But, the Fed will buy the debt and make the lenders whole. (Bailout out the lenders and finish the expansion to at least put people to work. So, it’s a zombie structure that might not every host an event. So??)
The long game is inflation. It’s the easiest way. Didn’t we all know this was going to happen? It was just a matter of when, right? …let’s just hope it is the “gentle” form.
The sad part is that our wounds were self inflicted.
“Just a matter of when…” True. But it’s amazing how being right but early or late looks so much like being wrong 🙂
Wonder what Mr. Bassman thinks of MMT?
Based on this article my “guess” is not a hell of a lot.
I kind of like him.
Bassman has written a ton on MMT:
https://heisenbergreport.com/2020/01/28/harley-bassman-on-qe-demographics-mmt-and-flying-pigs/
https://heisenbergreport.com/2019/05/01/harley-bassman-be-prepared-for-mmt-to-be-implemented/
https://heisenbergreport.com/2019/12/29/will-printing-press-financed-stimulus-break-the-back-of-the-four-decade-bond-bull/
This may have some value if indeed central banks shift to owning more gold reserves than currently held. The recent conditions where moving gold was hampered should give some pause to thinking gold is always universal fungible. Cannot sell gold that must be moved if means not move it are blocked. What can block gold movement? We have seen pandemics, what about volcanoes or nuclear war, or?
As long as a V-shaped recovery is occurring in risk assets, I think it’s going to be incredibly hard for central bankers/politicians to find the balls to print enough money to get us out of this liquidity trap.
If you really want to give a shit about growth, then we have to go trustbusting(if every company has a moat, we all lose), remove the tax deduction for interest(natural deleveraging), and find a way to incentivize more r&d.