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Fed Didn’t ‘Exacerbate Moral Hazard’ With Treasury Market ‘Intervention’, Fed Finds
By The New York Fed (via Liberty Street Economics)
In response to disorderly market conditions in m
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Great article. Moral hazard is dead,,especially if ‘it wasnt your fault’. But by the same logic, we should have universal healthcare b/c getting sick isnt ones own fault either.
Ok, sure. That is why the credit market is totally mis priced.
Look at the future cash flow projections, look at the corp leverage, look at the spreads and tell me that all is fine.
If I had a credit analyst that is sanguine and bullish here I would fire them for gross incompetence.
Corp credit is going to be a huge problem down the road leading to weak investment (productivity), less hiring, less innovation, lower standards of living and obviously lower growth.
One can argue that if the Fed did nothing the system would have ceased but they are so deep now they can’t get out. There is no exit. Period. So we delayed but did not iminate the eventual due date.
We never solve our problems, only postpone. The bill will come due and when it does the bill will be too large to handle.
But c’mon, look at the long term chart of the Fed’s balance sheet. We’ve been in a Great Depression / WWII style run up since 2008. But are we going to have a 1950-60’s era of US economic dominance again to bail the Fed out? Me thinks not…