π Endgame in the economic cycle and illustrating a painful recession
Yields had the opportunity to move and successfully played the 'elastic band' rejection from the inversion in 2019, which despite the length of the global CB combination, can be expressed in no other terms than reckless. FED was obviously aiming for the ideal position (the frontal defence from Fiscal this time around) which is a well known counter when the issue comes from private debt, however they were forced to 'bend the knee'.
Things proceed as follows:
1οΈβ£ Every other time this happened it ended badly for the global economy via recession. β
2οΈβ£ A Fed that lags and finances the Whitehouse will only add fuel to the flames... "it's different this time". β
3οΈβ£ The longer the delay in USD devaluation from Fed, the worst the blow is going to be in Equity markets. Assuming USD does not devalue materially into 2020 its repo will grow and continue expanding the balance sheet, one way or another eventually this is going to look like Fed has been financing the WhiteHouse and then the game is up. π 'we are currently here'
The Whitehouse has decided to follow hyperinflation, Dem voters were naive in this sense and thought they could hold rates lower forever without any consequences. Now we must waste more time pursuing their distant dream that taxation is a solution.
Wishful thinking if you ask me... the kind of overdrafts these governments have run up are several multiples beyond even Piketty's theoretical tax base. This ending of a cycle is a pragmatic demonstration of the lust to keep 'putting it on the card' and leaving private debt problems to future generations because of time being finite.
Finally a notion which carries its own duties:
In a debt crisis, as Japan have known for some 30 years a) you do not want an appreciating currency as the cost of servicing those debts will skyrocket in real terms and b) remain nimble...(get a peloton if necessary).
Thanks as usual for keeping the feedback coming π or π
This post created a lot of conversation and interesting feedback from others! We featured it on Editors' Picks. We'll be watching with you.
ridethepig
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Thanks guys @TradingView... fingers crossed it was helpful. Will try to build more of these macro charts for 2021 and hopefully it can become a way to grow the community and raise some conversations around the fundamental side.
murse_money
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1
sparrow_hawk_737
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" The Whitehouse has decided to follow hyperinflation, Dem voters were naive in this sense and thought they could hold rates lower forever without any consequences. Now we must waste more time pursuing their distant dream that taxation is a solution. "
WHY are you saying DEM voters? Trump was the most Anti-Austrian president since FDR. HUGE spending - he wanted powell to cut interest rates and start QE during 2018-2019 trade war!
ikt
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@sparrow_hawk_737, the place is full of Trump voters so expect a lot of mental gymnastics.
DC92T
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@ikt, I could care less who takes that job. But I certainly don't think a man who enriches his family with backdoor China deals and >45 years in politics is a good thing for our country.
ikt
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@DC92T, oh cool a Trump conspiracy, awesome. God this place is depressing.
> I certainly don't think a man who enriches his family with backdoor China deals and >45 years in politics is a good thing for our country
Well the good news is that you barely survived 4 years with the colossal fuckup that is Trump and his brain dead supporters, so you'll be fine.
fmkatz
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@ikt, Youre right as evident by the data tax cuts for the rich against what the narrative tells aren't good for the economy (not the market but markets are to a point as we will see derived on the economy ;) ) so a little corruption but investions in the right and not privat causes are still a lot better for the country so biden will probably sustain the us economy maybe make it even stable enough to actually take on china we'll see.
kvnmichael04
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@DC92T, backdoor china deal.....you must be talking about Ivanka