For Entertainment Purposes

For Entertainment Purposes

"Stagflation is the new investment backdrop," BofA's Michael Hartnett declared, in the latest edition of the bank's popular weekly "Flow Show" series. This week's installment was particularly foreboding, even as it broke no new ground. Hartnett presented what he called the "Charts of Darkness," which together comprise "a thematic 'dirty dozen'" highlighting, among other things, "the macro dislocations [and] wealth inequality caused by the central bank liquidity supernova" and "the coming stagf
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4 thoughts on “For Entertainment Purposes

  1. Yup. The Fed is here because for over a decade it has been stretching its tools farther and farther to hold the economy together, while the rest of the government has been variously confused, paralyzed, or self-destructive.

    Commentators who whinge about the Fed should consider where they – and their portfolios – would be if in 2008 and 2020, the Fed had said it would lower rates but do nothing more. Often: unemployed – and much smaller.

  2. When I look at Hartnett’s right chart, I don’t see “cement”. With Japan having failed to fail for 20+ years, I see a CB world stumbling forward into a future it knows it doesn’t quite understand yet, but doesn’t necessarily need to revert. At some point, finding yourself with new bearings, one simply stops trying to figure out how to “normalize” back to the past in favor of accepting your new environs and using them as context for solving the outstanding problems – like wealth inequality.

    A social analogue to the ZIRP transition might be the end of Bretton Woods in 71 (It lasted one generation). Many feared that ending the gold standard would yield apocalyptic debasement and floating rate chaos. Sigh, just move forward. Here’s Ian Shapiro on the end of Bretton Woods: “Economists present models and theories of how the world works, but in reality, politicians often fumble from one partial solution to the next. They’re reactive. They try something and when it stops working or becomes too costly politically, they try something else. And so it goes.”

    Gosh, America fumbling it’s way forward in the dark? Didn’t we patent that? A couple more Fed chairs down the road, we won’t even remember what used to constitute normalized monetary policy.

    1. Uptowner- what a great comment. I’ve been mulling over it for hours. Spot on! Yep.

      Perhaps a card analogy is appropriate = you have to play the cards you’ve been dealt, not the hand you wish you had.

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