Quote:
Originally Posted by tabs
The FED CAN NOT RAISE INTEREST RATES...debt Service and Equities would have a hissy fit. So how can they curb inflationary pressures..without ruffling feathers? They tighten monetary supply by siphoning off excess liquidity..
This is being done on a daily revolving door basis...it is an arcane mechanism that they can use to achieve their policy aims. creativity
Banks, FED and Treasury are working in a coordinated effort...either they do it or it is or else.
|
To be selfish and short term about it, I figure: excess liquidity has its largest and fastest effect on financial asset inflation (because you can buy and sell it at the click of a mouse, and greed/mania color most players’ view of the price) and less effect on goods inflation (it gets hard to store pallets of plywood or TVs, and no-one is stupid enough to think they’re gonna get rich filling their garage with either), with real estate inflation somewhere in the middle. So, suppose the BFT get their hands slip off the controls and liquidity goes nuts. Seems to me that financial asset prices will go up faster and by a lot more, before goods prices react and eventually filter through to inflation measures and expectations and force BFT to reach for the punch bowl aka brakes. Which means, you make money :-) before things start turning dour :-/ and you have to go defensive :-(
Isn’t that how market and economic cycles work in the modern economy? Wall St makes lots of money, eventually Main St starts making some money, and that’s about when the reset button gets pressed, and the smart part of Wall St is on the sidelines, the dumb part of Wall St loses money, and Main St loses job/house. Rachet this over and over, and no wonder the rich get richer and the rest maybe just hold on - and why the good investors have staying power through multiple cycles and the bad ones get blown out of the game.
The Redditt and Robinhood kids haven’t experienced a cycle yet. It will be fun when they do.