The markets just keep rising. Is the Fed on the right path after all? We see markets holding strong, from the stock market to real estate. The Fed keeps easing, which is helpful to markets.
In this video I discuss where the central banks are going awry and what could take all of it down. In an overly financialized economy, there is one thing that is fatal. Watch the video to learn what it is.
▶️ 3Speak
The fed has already backed itself into it's corner for a while. The lockdown only speed up the process. Steven Van Metre has proved with real economic data how there is a liquidity trap. Most of the economic indicators specify that we are heading towards deflation. Right now the long end of the bond curve and the short end of the bond curve are split apart in two different directions. Eventually one will pull it towards one side and the market will definitely suffer huge backlash when it does.
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Many believe that liquidity track was formed two decades ago. This is not a recent event. When they tried to tighten a couple years back, the markets reacted aversely. Thus, they have to keep easing.
Rate are already rising on the 10 year which could foreshadow a lot more pain for the markets and economy. In my view, with so much debt, we simply cannot absorb higher interest rates.
The real estate market would collapse almost overnight.
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Yes I have heard from a few bond experts that when QE started, it started the liquidity problem. According to their reasoning, QE is deflationary and by taking dollars away from the pool of available dollars, it removes liquidity. This in turn has caused a dollar shortage and reduced the velocity of money to it's lowest point in history (which we are currently living through).
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@jfang003 personally I do feel some sense of arrogance in the way the Fed loves to handle things,they tend to act like they are not willing to listen to corrections or opinion from others....and that is really affecting them in a negative way....
Was it the FED I saw an article about last night where their transfer system was down and they weren't able to send or receive funds for a couple of hours? I was going to read it a little more closely this morning and then I got busy.
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Yep. But bitcoin (and Hive) kept going.
Reddit was also down. Maybe they use the same servers. LOL
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Haha, that could be. Can't keep a good blockchain down!
Well if Bitcoin and hive keep going,then that is at least a good news.....lol....as for Reddit,,,may be.....
If that is true then that would really affect them and that is why they need to act fast in fixing it...
I agree with this analysis. The last point about the forced continuation of accelerating QE keeping zombie corporations alive is interesting. That leads to misallocation of capital and a threat of cascading defaults when these entities finally fall.
Technological disruption is creating new capital at a fast rate as we have seen with the tech sector.
I see no other path forward except printing even faster, allowing for the dinosaurs to die without the defaults taking down the entire system. Technologically disruptive new businesses will keep creating new capital.
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You are right. There is a serious misallocation of capital when zombie companies are allowed to persist. We are going to have to see them die to better position the capital.
Sadly that isnt likely to happen with the way things are.
This is where crypto currency is going to have to step in.
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@taskmaster4450le I wish the world Central banks can see this your video so that they can watch it and learn from it,they really need to see it...
The central banks have no choice. They backed themselves into a corner. There is no way to avoid what is coming other then austerity which is not about to happen.
20 years ago the Fed crossed the Rubicon putting themselves in the liquidity trap. They simple cant print their way out of it yet they are tring.
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For every action we take we should be ready for the consequences be it bad or good... You are right though...the Central banks should carry their cross...
An overly financialized economy tend to disrupt the purpose of the economy itself....that is why I will always keep supporting the cryptoeconomics because it conforms with the way the future of the economy should be like....
@taskmaster4450le the Fed needs to be more creative in their approach to the way they handle those markets,you cannot keep doing the same thing and expect different results...they should think ahead and stop thinking old-school....
Economics is a wide topic with different opinions and ideologies and that also plays out in all sectors of the economy....but I believe the common goal everyone should have is a "better economy" irrespective of different ideas and perspectives....great video by you sir...
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Summary:
In this video, Task highlights the potential peril facing the economy, primarily due to the current state of central bank policies, especially in the context of the COVID-19 pandemic. He discusses the impact of economic downturns, the massive printing of money by central banks, the risks associated with low-interest rates, and the formation of economic bubbles. Task emphasizes that a significant rise in interest rates could trigger a chain reaction leading to the collapse of the economy, particularly impacting heavily indebted companies and governments. He debunks the idea of widespread hyperinflation, underscoring the role of interest rates as a defense against inflation. Task warns of potential economic Armageddon if interest rates rise sharply and the market collapses, leading to a period of severe deflation and economic turmoil. He concludes by suggesting that the central banks are aware of these risks but are struggling to find a way out of the current situation.
Detailed Analysis:
Task begins by painting a grim picture of the current state of the global economy, highlighting the significant impact of COVID-19 on various economies, with the British economy experiencing its largest GDP drop in 300 years. He points out that central banks worldwide, led by the Fed, have resorted to extensive money printing to combat the economic fallout caused by the pandemic.
Task argues that central banks, especially the Fed, are in a liquidity trap where they are compelled to keep printing money due to limited feasible alternatives. He mentions that the continuous money printing has led to the creation of economic bubbles, particularly in assets like bonds, real estate, and the stock market, which could potentially lead to a catastrophic burst.
The speaker challenges the common belief that money printing leads to inflation, asserting that inflation has not materialized significantly despite decades of such practices. He predicts a future commodity run due to supply chain issues, which may lead to increased prices of commodities like oil, food, and precious metals.
Task expresses concern about the potential risks associated with low-interest rates, particularly emphasizing the danger of a sudden increase in interest rates. He elucidates how a slight uptick in interest rates could trigger a series of defaults, especially among highly indebted companies dubbed as 'zombie corporations,' ultimately leading to an economic collapse.
Furthermore, Task discusses the adverse effects of rising interest rates on debt servicing costs for corporations, individuals, and governments, which could significantly reduce the available funds for productive investments. He warns that an economic slowdown could ensue if interest rates continue to rise, exacerbating the existing economic challenges.
In conclusion, Task paints a bleak future scenario, suggesting that a significant rise in interest rates could lead to economic Armageddon for several years. He argues that due to extensive easing implemented by central banks for an extended period, the economy has not experienced robust growth, leading to the precarious situation faced today. Task asserts that central banks are trapped in a cycle where any attempt to tighten monetary policies might further worsen the economic conditions, given society and markets' addiction to cheap money.
@taskmaster4450le the Fed caused the liquidity trap that is been experienced right now....
That is why is good to have a wonderful knowledge about the economy in order to be able to handle it well the right way it should be handled....
I enjoyed watching your video sir...
@taskmaster4450le well I believe this is now the right time for the cryptoeconomics to become more relevant and useful to us ..I believe that change is constant and we should be ready to adapt to those changes that is been experienced...
@reonarudo
You have just said the plain truth
..that is what can be done....
@taskmaster4450le am I the only one who do not feel pity for the Fed??lol