Loading ...Potential For Panic
Wednesday morning I posted an article from ZH where the author correctly suggested a 1/4 hike and that would be the end of the rate hikes. I also commented with this, “While many in the raise 1/4 camp cite the FED’s credibility as an issue, what happens to their credibility if they raise 1/4 today and in a few days because of weak banks, have to cut 1/2 or take other measures to provide more liquidity? 1/4 does absolutely nothing in fighting inflation that wasn’t already provided by the 4.5% of increases so far. The better play would be to pause. They can continue raising if things settle down and inflation is persistent or cut if needed to stabilize the system. Up and down would remove whatever credibility they might have left, which isn’t much.” So here it is Friday and more bank problems especially in Europe and with Deutsche Bank in particular. Unless Yellen & Powell pull some magic rabbit out of their hat today, the deteriorating financial system is likely to build into panic over the weekend. They are going to have to come up with a Plan B to stop a collapse which will probably include an emergency rate cut of between 50 basis points to a full one percent! Up and down in less than a week and what little credibility they had will be gone. Powell and Yellen won’t be too far behind.
You are preaching to the choir my man.
You should go down to your local Walmart with a megaphone and try to explain this to the unwashed masses.
Good luck.
The Fed doesn’t care if The Europeon banks are in Trouble
That’s on the ECB and they just raised 1/2 point
I am following Luongo…he has been right on for a long time now
He thinks the FED will do another 1/4 then maybe pause…maybe not…but won’t cut this year
He thinks the new facility where US Banks are now made whole by valuing their bonds at par…keeps their solvency assured
The Plan is to remove liquidity from the Eurodollar markets and bring Dollars home
The European Stocks are cratering and the US Markets supported as money flows to the US
Until I see a deviation from ths scenario I am following Luongo
The DAVOS crowd needs a banking collapse to push the CBDC implementation — we are in the build up of FUD stage — TPTB will take Deutche Bank down next (possible this weekend) and the media will proclaim doom and gloom forever. Each time they do something like that it gives them an opportunity to line their pockets and skewer the economy. The backstopping of NA bank collateral will not be mentioned.
regarding CBDCs…Powell just said the other day they are in the very early days of exploration…likely years away from even deciding if they should be implemented…thats my understanding
The FED absolutely cares what happens to European banks because they and the US and every other global bank are each others counterparties for the quadrillion in derivatives. That is why when it was clear Credit Suisse was in trouble the FED opened swap lines again with the ECB, the Swiss National Bank and others. Warren Buffet’s famous line wasn’t just a pithy quote, derivatives are the financial equivalent of nuclear weapons. If one major bank goes down and defaults on their derivative book, the dominoes fall and no one, not even the FED can put put things back together. They have to keep printing and providing liquidity to everyone in the system and raising rates at the same time is stupid and won’t work. The rate cycle worked on inflation for now. Stability is the current problem. If they stabilize things for a while by cutting and printing, inflation will come back even stronger in the future. Lose/lose.