Former Fed Governor Kevin Warsh: The Fed doesn't seem to have a serious theory of inflation (youtube.com)
So, the Fed allowed big banks to take advantage of an arbitrage.
The Fed paid them to hold onto reserves rather than give the reserves out as loans, so those banks were ‘paid’ more than normal businesses would have been.
Long ago (Greenspan) there was a Fed funds rate. The rate that mattered. Now there's a lot of rates (which the Fed juggles). Interest on excess reserves rate, included. A series of risk free assets that compete with the Treasury, that come from Fanny and Freddy and home-loan banks and government guarantees. So the Central Bank went from a simple way to manage it to a complicated way.
The Fed now doesn't just act in emergencies but now in all situations for all reasons, and they often act for cross-purposes, like loosening policy rate to provide accomidation while modestly tightening financial conditions for the balance sheet.
And other countries see this and try think it's a weakness to take advantage of.
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Netflix surprise beat (despite there being nothing on it to watch and it having a really bad annoying unusable UI). I guess there just isn't a stronger alternative (which Cable used to be something like, and is still my favorite except it's kinda ruined now with being digital so it takes a second to load each channel, whereas before you could just click through the channels and you could see immediately what was on each one.
Tesla surprise beat (up 20% that day).
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Gold (safe asset) is has gone from $2000 at the start of the year to $2700. Meanwhile bonds have been losing value. All time highs for stock markets. Bitcoin at highs (near anyway).
US dollar complex is thriving so dollar is stong. Back end yields are rising. People own more puts than calls in the bond market.
If there's growth with Trump, more inflation, risk premium needed is higher, priced into market now. People think his plan will contribute to a stronger economy more than Harris'. Both candidates have shown that under their presidency the record level of debt will increase (just positioning?).
People maybe think Fed will have to raise rates again because inflation might return. So markets, gold, bonds, might have more to do with inflation than the election. But higher rates which fight this inflation can be bad for equities. Companies can, however, reduce spending and therefore increase profits. And higher rates also harm bonds (and imply inflation). Equities go down in value, real estate and home values go down. Consumers can cut costs also, like not buy new things, and thereby increase their savings. Or tighten but then you have less spending. (Europe austerity.)
Hey, wanna buy some 10-year bonds that yield 4%? and you look around and see all the inflation and say ...?
Market up could be just because the Fed telegraphed that there'd be a lot of rate cuts this year.
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China is buying gold instead of dollars, reportedly.
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Major budget crisis in many countries. Massive and broad tax increases in France, UK.
Will we just roll over the spending which is beyond production value? and emerge spending less, with less things being done?
People are buying gold and bitcoin. And equities would go up because of simple inflation.
People will just stop trusting the government with money, and therefore have to stop trusting the government's money?
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57% of GenZers want to be influencers as their career. Job is almost like a secondary option.
Argentina. Milei slashed government budget, and inflation has gone from 25% to 3%. But the economy is smaller (1.7% smaller in last quarter), there's less government spending. Unemployment up to 8% and rising.
Sachs made an argument that while Argentina has a already-weak economy with lots of unemployment, so cutting government spending hurts. But America has a strong economy and lots of employment, so it could actually be good to cut spending now (and thereby reduce salaries for citizens who are paid as government workers) because we need to reduce employmet to cool and therefore let's reduce from the bloated government maybe, and also that this reduction of what the government does could be stimulive to private sector business.
There's waste government spending ‘everywhere you look’ Joe Lonsdale. They're giving money to groups in the Middle East to try to stop hate speech and disinformaiton, and then find they're funding people who are doing disinformation against Israel. So of course slashing government (The Trump/Elon thing) is a good thing, he said. Even for moderates.
Someone said ‘something will have to break’ with spending and funding today. I haven't heard that in a couple years, but during the first months of moneyprinting during the pandemic, that was said several times as the typical way these things reach their climax. Unaccountable NGOs.