Many are saying there is no recession now or coming soon and point to various figures to prove it... This ignores deep structural problems that have been covered up by QE. QE itself was a cook the books kind of scenario to provide liquidity... Then it became impossible to roll it back once companies and the market got addicted to the money.
So now we approach a point where tightening has to happen because both the Federal Reserve and U.S. Govt have run up the balance sheets and debts to very high insane levels not meant for "peace time".
Now as they attempt to roll it back, certain issues start to appear. First due to lots of factors... main one likely being generational bretton woods style changes to the global economy and the reserve currency used. The only argument against this is that China, Russia and maybe most of OPEC moving away from using dollars to handle various transactions tends to cause certain unexpected issues while that is happening.
One of those is inflation since for mant years it has been one of the United States main exports...
So while all of this is rolled back or changed, it reveals all of the existing structural problems that were never really addressed...
All of these factors either mean a big crash or a controlled demolition of the whole QE system and a global reordering of trade.
There are far too many factors to control and many more are not controllable. So expect a crash.
To determine when this is likely, maybe watch the repo and reverse repo market rates. Since 2020 they have increased steadily, now in trillions of overnight funding needed, and continuing to grow. This could quickly lead to something not often discussed where the Federal Reserve loses the ability to control interest rates.
It is kind of a paradox, balance sheet growth -> liquidity -> inflation -> higher borrowing costs -> more balance sheet growth.. This process cant go on forever...
Many metrics exist to watch it but the idea that the Govt will one day say OK we cant fund repos tonight, everything financially will be locked up by morning... like 2008 but worse..
That Paul Volcker guy had a lot of good ideas that they tried and failed to implement since 2008. Maybe those will deserve a second look, once all of this is over. Point being, nothing was fixed since the 2008 crash and as soon as the free money runs out, it will be obvious.
Also, inflation kills democracies more often than anything else.
So now we approach a point where tightening has to happen because both the Federal Reserve and U.S. Govt have run up the balance sheets and debts to very high insane levels not meant for "peace time".
Now as they attempt to roll it back, certain issues start to appear. First due to lots of factors... main one likely being generational bretton woods style changes to the global economy and the reserve currency used. The only argument against this is that China, Russia and maybe most of OPEC moving away from using dollars to handle various transactions tends to cause certain unexpected issues while that is happening. One of those is inflation since for mant years it has been one of the United States main exports...
So while all of this is rolled back or changed, it reveals all of the existing structural problems that were never really addressed...
All of these factors either mean a big crash or a controlled demolition of the whole QE system and a global reordering of trade.
There are far too many factors to control and many more are not controllable. So expect a crash.
To determine when this is likely, maybe watch the repo and reverse repo market rates. Since 2020 they have increased steadily, now in trillions of overnight funding needed, and continuing to grow. This could quickly lead to something not often discussed where the Federal Reserve loses the ability to control interest rates. It is kind of a paradox, balance sheet growth -> liquidity -> inflation -> higher borrowing costs -> more balance sheet growth.. This process cant go on forever... Many metrics exist to watch it but the idea that the Govt will one day say OK we cant fund repos tonight, everything financially will be locked up by morning... like 2008 but worse..
That Paul Volcker guy had a lot of good ideas that they tried and failed to implement since 2008. Maybe those will deserve a second look, once all of this is over. Point being, nothing was fixed since the 2008 crash and as soon as the free money runs out, it will be obvious.
Also, inflation kills democracies more often than anything else.
May you live in interesting times.