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24/12/19

17:30

Post #: 42122676
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Originally posted by Crom Valen: ↑

whatever Joe Public thinks then rest assured the powers that be have though of it plus any number of other factors. Debt is not introduced blindly with no idea of consequences.

I’d love to know how the Fed gets out of this trap. You present a belief in the infallibility of the Fed, but no answers.
Your argument is a bit similar to those religious leaders use: ‘it’s all too much for our tiny minds to understand, just have faith and enter into blind acceptance, no evidence is needed’.

I don’t think the Feds master plan would have involved trying to normalise interest rates and tighten their balance sheet up, then rapidly back-pedaling and slashing rates, then buying short term treasuries and carrying out ongoing operations in the repo market. This smacks of a central bank desperately trying to maintain control, and praying that there will be some natural growth at some stage to come along and rescue the situation.

At the moment the only GDP ‘growth’ is coming via the increasingly indebted US consumer & via massive government spending.

The Fed are in a situation they never envisaged when they started their response to the GFC. They have created a dilemma where they cannot normalise interest rates because it will cause a recession and a crash. But interest rates need to normalise in order to stop the debt mountain which is expanding to enormous proportions. This is the trap from which there is no escape.

The US government is in the same situation. They now must continue to run huge deficits to prop up the economy. If they turn off the taps, they will cause a recession and a crash.

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Absolutely excellent post Crom.

hope you enjoy a good Xmas break.

How much further can they kick the can ???
7 Upvote

0 Great analysis

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