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The Fed really is a piece of work. Always the same BROKEN playbook
The economy starts to falter. So the Fed drops rates to zero, making safe treasury investments a non-starter
Then they hand out trillions and force people to chase yield when they just took it away... (1)
The economy starts to falter. So the Fed drops rates to zero, making safe treasury investments a non-starter
Then they hand out trillions and force people to chase yield when they just took it away... (1)
What happens, of course? SoftBanks happen. Fat cats flush with new cash chase every moonshot play because they have no other way to get yield, thanks to 0% rates
That, that, is how bubbles are created.
It always ends the same way; the spigot starts to dry up a little... (2)
That, that, is how bubbles are created.
It always ends the same way; the spigot starts to dry up a little... (2)
When that happens the bubbles they have been inflating start to deflate. Now those long shot plays that looked OK when swimming in liquidity, well they don’t look so hot anymore
Eventually a slow leak turns into a full blown panic, and a crisis is born... (3)
Eventually a slow leak turns into a full blown panic, and a crisis is born... (3)
This is the logical, and inevitable, end result of dropping rates to zero and pumping liquidity at the EXACT moment an economy is faltering
You want to encourage risk taking like that when the economy is growing, not when it starts receding... (4)
You want to encourage risk taking like that when the economy is growing, not when it starts receding... (4)
The exact same way a bank doesn’t lend truck loads of cash at 0% to people who just lost their job - they lend it to growing businesses
Instead, we give out the cash at 0% to a retreating economy
And then the head scratching begins when the bubble pops, how did this happen?!?
Instead, we give out the cash at 0% to a retreating economy
And then the head scratching begins when the bubble pops, how did this happen?!?
