Warning. Rant Alert: The global central bank easy money experiment has failed and it is past time that central bankers stopped bullshitting us and just admitted it. Europe is about to enter a recession and rates are still negative, the US Fed just tried to reduce its balance sheet with the greatest economic backwind in years (tax cuts, record buybacks, 3% GDP growth) and still they failed miserably, forced once again to halt all rate hike efforts. After 10 years of being non stop “accommodative” the Fed tried for 3 months to not be accommodative and it blew up in their face as the bottom dropped out of markets.
Only emergency liquidity calls from Cabo by Treasury Secretary Mnuchin and a complete 180 degree reversal by the Fed stopped the bleeding. Again.
And so once again the Fed is asking us to play chase the dot plot. Always dangling higher rate forecast targets that never come to fruition:
ot playing anymore. For 10 years we’ve watched the dot plot being moved further and further into the future only to see it all flat line again now with a renewed halt in rate hikes and an end to reducing the balance sheet. The conclusion is pretty clear:
The Fed is trapped, the ECB is trapped, the BOJ is trapped all doomed to intervene forever and ever amen always afraid to see markets go through a process of repricing and squeezing out the artificial asset inflation that 10 years of permanent intervention have wrought.
All are too afraid of the next recession and aim to avoid it at all costs. And who can blame them? The prospect of entering a global recession without enough ammunition to deal with it is a frightening prospect.
And don’t think for a minute that the next rounds of stimulus, i.e. QE4 and negative rates, will have the same effect as last time. Already the current effect is very questionable. The US has been stumbling from lower highs on the Fed Funds rate for decades with that stimulus of ever lower rates producing ever less real GDP growth:
https://northmantrader.com/2019/02/11/rant-alert/
Cap 2 you should be familiar with by now, it is the long term disconnect that is being highlighted in cap 1.
SPY vs HYG (Hight yield credit) bifurcation.
Thee guys have been ON IT for a some time.
Charts don't lie…people do.