The Fed along with other central banks are easing their pants off. They are engaged in low interest rates and money printing galore.
So this brings up the question will they ever tighten again?
In this video I discuss some of the variables in this equation. The Fed is truly in a difficult position. The fact that if they are not able to ease soon, they might never be able to again if it goes on for a few more years.
▶️ 3Speak
As I see it (minimizing the problem) it is as if during a game of monopoly the bank would hand out money every time one of the players is close to losing.
Although it may seem like a good solution, the truth is that inevitably the money will continue going to the pockets of the "best player". This will eventually increase the gap between players.
The real problem rises when the big players have so much "money" that they can afford to turn it down and ask for assets as a form of payment.
Once that point has been reached the "easy solution of printing money" becomes ineffective.
This type of devaluation will never be healthy for the financial environment, beacuse savers will begin to look for other ways to hold their richness, maybe real assets, maybe other currencies or even cryptos Who knows?
I am not sure what policies could be implemented, but certainly money printing should be stopped.
I hope I have understood the problem properly, if I have misunderstood anything I apologize in advance.
Thanks to share your thoughts
Pp.
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It is a dual situation. Those closest to the Fed benefit the most. Who is that?
We start with the banking system, both institutional and commercial. Then we get hedge funds as well as other investment accounts (pensions, etc...). This benefits the money managers to a great degree.
Next up is the corporations who money at low rates. This helps the shareholders. Then there are the C-level employees along with other upper management. They have stock options and other "equity" compensation plans.
Then we get to middle management and then finally we get down to the worker plebes.
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It's completely obvious that this has benefited crypto in an enormous way. The money printed is going directly to the financial markets. Low interest rates are keeping equities attractive. Cryptocurrencies as an asset class are closer to equities than anything else. To be more exact, they behave like risk-on equities like the speculative extreme of the tech sector. The appetite for risk that an increasing number of institutional investors currently have is a direct consequence of central bank policies. Institutions are interested in the massive upside of crypto as a new asset class vs. equities.
I've been amused by reading about how many investment gurus whose experience is telling them that equities are overpriced at the moment are choosing to sit on cash. So long as central banks are forced to keep easing, risk-on assets will be fine and those sitting on cash will lose.
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I fully agree on the impossibility of tightening. Also, you're right about why there is a point of no return. The debt levels will simply keep on piling, which will necessitate more easing.
The real question is what the endgame of this will be.
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The situation is worse when one views it from the International perspective as opposed to just the US/Fed only one.
That is why the DOW is doing so well, it is the destination of a lot of international money. We could see the march towards 40K on the DOW in all of this.
As you said, these shifts are not going away. The hunt for return is going as long as the fixed income is basically dead.
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The bond market will be left for the central banks to prop up. Interesting times ahead to say the least.
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Defaults are taking place...yes
All these issues depict the global situation.
Great identifications, @taskmaster4450le
Today I sit and wonder about PayPal's move to accept BTC payments...and how the vendors, the sellers will get no BTC slice of pie, no satoshi....banks are desperate to own BTC now, as I see it.
Let's hear what Biden has to say in an hour :)
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It doesn't matter. He is a puppet in this affair as are most politicians.
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He's a puppet because he's a public figure :)
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The problem I see is that Powell tried to tighten back in 2018 and the markets rejected it. I don't think they can tighten again anytime soon. If you haven't noticed, congress and wallstreet just keeps on asking for more money back. I think it is a lost cause given that they have no other tools left. Right now it is only faith keeping up the markets and the economy intact.
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The truth is the economy couldn't take the tightening and the markets knew it. In spite of the rhetoric from Trump, the economy wasn't on firm footing. We are now seeing how precarious things were.
It seems like we have convinced ourselves that 3% growth is roaring.
The Fed is truly screwed.
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Well you know my opinion regarding the creature. If it were up to me I would have shut it down in 2009. My assessment is there may be at some point a reorganization of the “Fed”. Don’t be surprised if grandpa institutes some major financial overhauls in the new green deal...
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Not sure they will be able to. Markets through a tantrum every time we get a rate move.
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Summary:
Task discusses the Federal Reserve's policy and whether they will tighten or continue their current approach. He believes that the Fed is facing challenges due to the economic situation, high levels of disruption, and struggling sectors. Task highlights the impact of technology on employment and companies, emphasizing that the Fed may struggle to reverse their current course of action.
Detailed Article:
In this video, Task delves into the Federal Reserve's policy and its potential for tightening in the future. He begins by noting that despite concerns over money printing, he believes the situation might not be as critical as perceived due to the challenging environment in which the Fed operates. Task expresses his view that the Fed is likely to remain stuck in their current position for an extended period.
One of the main obstacles Task outlines is the current economic scenario, indicating that while certain sectors are thriving, others are struggling or under attack. He predicts that disruptions will become more evident in various industries over the next few years. Task emphasizes the issue of companies not performing well, warning that tightening measures could lead to increased defaults and economic contraction.
Another significant challenge highlighted by Task is the employment situation. He mentions that there are still many unemployed individuals, and the unemployment rate, while showing trends, may not fully reflect the reality as some are not counted due to various reasons. Task discusses how companies are putting pressure on employees, leading to stagnant wages for many workers, except for certain high-demand professions like engineers or data analytics experts.
Moreover, Task emphasizes the rapid expansion of technology, including robotics, AI, and cryptocurrencies, which he believes is impacting companies' profits, employment, and overall operations. He mentions that some companies, referred to as "zombie companies," employ many people and their potential closure could lead to further job losses and exacerbate existing challenges faced by the Fed.
Task concludes by asserting that the Fed is cornered in the current situation and does not see them being able to reverse course by raising interest rates or reducing their involvement in the market. He anticipates that easing measures will likely continue for an extended period unless significant improvements occur swiftly. Task cautions that the impact of technology on employment and industries will become more pronounced in the coming years, making it imperative for the Fed to address these issues promptly to avoid a prolonged period of easing.