GFC 2.0 is going to be wild
I'm starting this blog just days after nearly every single central bank that matters has begun a new cycle of monetary easing.
As a long time adherent of Austrian economic theory (as the name of this blog suggests) I can't stress how revolting it is to find myself living in a world where every central bank in the world apparently does not understand economics, finance, or even the purpose of money. Alternatively, perhaps they do understand these things quite well and maliciously and purposefully act to undermine them.
Take your pick.
Truthfully this shouldn't be surprising. Bond markets have been screaming that something is very wrong with the economy since the end of May:
That the Fed won't respond in any meaningful way (by conventional standards) until two months after the fact is of no surprise, after all the Federal Reserve seems to be run either by idiots or willfully malicious people (it's difficult to know which though one tries to apply Hanlon's razor consistently) but what's truly disturbing is they will enact the exact opposite of the proper remedy.
Bond yields aren't telling us monetary conditions are "too tight" and thus need easing, they are telling us that there are no savings left for any real economic activity to grow out of. The Fed's response to this? Cut interest rates, encourage more spending, discourage anyone from saving.
"Yes, yes we understand there's no savings for further investment." the Fed says.
"Why not load up on some more debt? We'll even offer it to you for cheap!"
It'd be a bit like a doctor informing you that you have cancer and proceeding to recommend you inhale asbestos for the next six months straight as the remedy.
As much as even the normies at CNBC understand an inversion of the 3m/10y yield curve is an ominous sign one wonders what they might think if they realized how close the 3m/30y curves are to inverting--that's happened twice in the last 19 years--2000 and 2006/2007. Gee, what was going on then I wonder?
But sure, "cutting rates" will help us. Just like it didn't help us the last two times.
Well, unless you were Goldman Sachs or Citi Group. Funny how that works.
As a long time adherent of Austrian economic theory (as the name of this blog suggests) I can't stress how revolting it is to find myself living in a world where every central bank in the world apparently does not understand economics, finance, or even the purpose of money. Alternatively, perhaps they do understand these things quite well and maliciously and purposefully act to undermine them.
Take your pick.
Truthfully this shouldn't be surprising. Bond markets have been screaming that something is very wrong with the economy since the end of May:
"We are worried"--Sincerely, Bond Yields
That the Fed won't respond in any meaningful way (by conventional standards) until two months after the fact is of no surprise, after all the Federal Reserve seems to be run either by idiots or willfully malicious people (it's difficult to know which though one tries to apply Hanlon's razor consistently) but what's truly disturbing is they will enact the exact opposite of the proper remedy.
Bond yields aren't telling us monetary conditions are "too tight" and thus need easing, they are telling us that there are no savings left for any real economic activity to grow out of. The Fed's response to this? Cut interest rates, encourage more spending, discourage anyone from saving.
"Yes, yes we understand there's no savings for further investment." the Fed says.
"Why not load up on some more debt? We'll even offer it to you for cheap!"
It'd be a bit like a doctor informing you that you have cancer and proceeding to recommend you inhale asbestos for the next six months straight as the remedy.
As much as even the normies at CNBC understand an inversion of the 3m/10y yield curve is an ominous sign one wonders what they might think if they realized how close the 3m/30y curves are to inverting--that's happened twice in the last 19 years--2000 and 2006/2007. Gee, what was going on then I wonder?
"We are almost in a complete panic"--Sincerely, Bond Yields still
But sure, "cutting rates" will help us. Just like it didn't help us the last two times.
Well, unless you were Goldman Sachs or Citi Group. Funny how that works.
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