bhanacik said:
Heineken-Ashi said:
bhanacik said:
I read it, thanks for posting.
It was enlightening and a bit over my head, but it was still a worthwhile read. It seemed very well researched.
One thought that I had while reading was it will be interesting to see how this all plays out 1-2 years from now. I got the feeling from the article that we can just continually kick the can down the road by essentially continuing to change the rules. I'm not sure if that's good or bad.
I also thought, "were there any similar articles like this back several decades ago"? I'm assuming there were and if so, why didn't the majority of people act more proactively to avoid the big downticks. Maybe it's just a testament to people not being educated on the markets and how our government thinks about policy decisions, and the population just blindly DCA's into their 401k's thinking everything will be ok long-term.
There's not much the people can do. They gave away control of the currency in 1913. So when the FED expanded its power to manipulate in 2008, and then again in 2020, and THEN AGAIN in 2023, the only thing we could do was shake out heads. The politicians don't have a clue how it all works. And when the FED comes in and says "we are doing this TO SAVE YOU", 90% of the population says "ok, thanks!". Why? Because we're fat and happy from decades of free money fake prosperity, and objecting to the FED would mean objecting to your own false sense of prosperity.
And no, they can't kick the can forever. They can try, but the FED is not the market and cannot control markets. Go back and read my highlighted quote from the article again. When the secondary market refuses to buy our debt except at higher returns (higher bond yields), the FED will have lost control, rates will spiral upward, the stock market will crash.
I guess this is my point - don't you think people had similar thoughts back in 2007, 2019, and 2022 saying the exact same things prior to the FED changing the rules?
If there's nothing we can do but shake our heads and we have no choices other than to keep playing the game or just sit it out; it seems the better financial decision would have been to keep playing the game (keep investing $$ into the market)
No, because what they did in 2008 was unprecedented. From another Daniel Amerman article..
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There has been a mass illusion of the Fed printing money without limits. The objective facts can be seen by looking at - and more importantly, actually understanding - the Federal Reserve's balance sheet. The fact is that money printing is only of four core sources of spending power for the Fed, and it was only the third most important source of funds in 2021.
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The objective facts are that the Fed bought $3.7 trillion in new assets by taking out $3.7 trillion in new debts. The Fed borrows the money to spend the money. Any beliefs that state otherwise, are opinions that are not based on the facts.
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While few people realize it to this day, the primary funding for the Federal Reserve radically changed in 2008 when emergency legislation brought forward the effective date of the Financial Services Regulatory Relief Act of 2006.
The global banking system was teetering on the brink of collapse, and neither the government nor the Fed had the money to rescue them - so the U.S. government changed the law, to give the Federal Reserve unprecedented back door access to the U.S. banking system and the spending power of our bank accounts.
This new back door access allowed the Fed to quickly grab almost $800 billion from the nation's banks - that are funded by our deposits - and to use that money to rescue the global banking system. If the Fed had not had access to the spending power of our banking system - the system would have collapsed, there were no "strong banks" in practice. This is critical information to keep in mind if there is another major crisis in the banking system.
It was this back door access that was the source of funds for the quantitative easings, as the Fed used its new trillions in spending power to fund the growth in the national debt while taking unprecedented control of interest rates. It was our bank accounts that were the source of funds that the government used to shower the country with stimulus checks, sending us back our own money in redistributed form.
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The money printing did occur. But it was relatively minor when compared to the raid on our bank accounts. So, the idea that it is all money printing is a myth. Indeed, it is a convenient myth for the Federal Reserve and U.S. government. So long as people mistakenly think it is all money printing, then they don't think to look elsewhere for the real source, which is the massive back door emptying of the spending power in our bank accounts.
And now the chickens are starting to come home to roost. It's way too late to do anything about it, as pointed out in the first article. The only thing they can do is continue to borrow money to pay off previously borrowed money. And the sources to borrow from are drying up which means borrowers are going to increasingly demand higher rates. 2008 recovered BECAUSE they didn't print money. The taxpayer was completely oblivious that their money was stolen and then loaned back to them (well, not them.. mostly the more wealthy class who got rich off of it). They are oblivious today that the only way 2023 wasn't the start of the collapse was because of a new backdoor, BTFP, which had the Fed borrowing money, that they had previously loaned to banks, and paying banks higher interest than the what the banks were paying them. One giant circle of life that used newly borrowed money to inject cash into banks at a time when banks were about to crumble.
Can they concoct some new ponzi scheme to kick the can? Sure? But it's not going to stop things from deteriorating. and the pace of deterioration will continue to exponentially grow., lessening the time between events where they have to pull of new version of miracle rescues. But again, their balance sheet is screwed where it wasn't before. And if they drop rates, it will be the first time they have dropped when bond rates didn't drop first. You can welcome in hyperinflation in that case.
“Give it hell Heinekandle, I’m enjoying it.”
- Farmer @ Johnsongrass, TX
“No secure borders, no alpha military, no energy independence, no leadership and most of all no mean tweets - this is the worst trade I’ve ever witnessed in my lifetime. ***Put that quote in your quote/signature section HeinendKandle*** LOL!”
- also Farmer @ Johnsongrass, TX (obviously in a worse mood)
