Probably won't age well. But I think it does not matter much anymore to be honest. Markets are looking beyond the hiking cycle IMO. That is why market metrics look rich currently, when they are in fact cheap.
I agree with you that QE5 is an inevitability at some point in the future, but was thinking it would come as a result of economic weakness, rather than a problem in the financial markets, although the turmoil and panic in UK Gilts last year is clearly a sign that this can happen in large, liquid sovreign debt markets. Have we become completely dependent on our Central Banks, not as lenders of last resort, but bond buyers of last resort in an ever increasing debt spiral that strenghtens that dependence as it piles up whilst becoming increasingly difficult to grow our way out of? How can we avoid this spiralling out of control?
In my opinion, the optimistic long term scenario would be that we get on a trajectory similar to Japan, where QE becomes endemic without much economic or social disruption. The more pessimistic scenario would be that this type of financial engineering will be further fuel for the social and political tensions in the US and entire Western world. Especially considering that further digitization will put pressure on white collar wages making it more and more difficult for large parts of the population to maintain their financial sovereignty.
Care to share your best guess on how high the FFR goes?
I'm on the record that I think they won't cut anymore. :D
https://fallacyalarm.substack.com/p/jan23-fomc-digest
Probably won't age well. But I think it does not matter much anymore to be honest. Markets are looking beyond the hiking cycle IMO. That is why market metrics look rich currently, when they are in fact cheap.
I agree with you that QE5 is an inevitability at some point in the future, but was thinking it would come as a result of economic weakness, rather than a problem in the financial markets, although the turmoil and panic in UK Gilts last year is clearly a sign that this can happen in large, liquid sovreign debt markets. Have we become completely dependent on our Central Banks, not as lenders of last resort, but bond buyers of last resort in an ever increasing debt spiral that strenghtens that dependence as it piles up whilst becoming increasingly difficult to grow our way out of? How can we avoid this spiralling out of control?
In my opinion, the optimistic long term scenario would be that we get on a trajectory similar to Japan, where QE becomes endemic without much economic or social disruption. The more pessimistic scenario would be that this type of financial engineering will be further fuel for the social and political tensions in the US and entire Western world. Especially considering that further digitization will put pressure on white collar wages making it more and more difficult for large parts of the population to maintain their financial sovereignty.