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July 12, 2018, 04:09:15 PM |
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This metric (shape of the yield curve) only mattered when a functional market actually existed.
What if the QE tapering causes a serious crash in equities, and the Federal Reserve respond by propping it all up again? All they have to do is simply underwrite everything they need to so that the system continues to tick away. 2008 proved that the extent of corruption in the financial system was so prevalent and so severe that more or less everyone needed to be bailed out. That means that there should exist now zero discipline in the behaviour of the financial market big players and zero belief in any consequences for that. Where's the incentive to care about the FRN yield curve, when you know you can keep borrowing money for nothing and spending it on your own stock price? There's nothing stopping the Fed from manipulating the bond market too, why does it even matter?
To me, the commodity markets are the key to the bubble bursting. Despite hundreds of % inflation of the money supply, everyday living has been shielded from corresponding inflation. That can't last, as soon as the rest of market runs out of real assets to buy up, demand has to find somewhere else to go. Obviously there's been some general inflation (and it's been masked in the official numbers of course), but not multiple hundereds of %. At some point, it's going to suddenly go crazy.
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