Credit Bubble Bulletin/Doug Noland/6-18-2023
Selected quotes:
“Powell: ‘It’s reasonable. It’s common sense to go a little slower… Gives us more information to make decisions. We may try to make better decisions.” I’m all for the Fed trying to make better decisions. But such complex analysis must go much deeper than ‘common sense’. The so-called “hawkish skip” is both messy and problematic. It has left analysts confounded, while a highly speculative stock market couldn’t be happier. Loose conditions as far as the eye can see; latent fragilities safeguarding the ‘Fed put.’”
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“Financial conditions remaining so loose in the face of aggressive Fed rate hikes has been a huge surprise. Importantly, when it comes to modern-day financial conditions and market structure, there’s a thin line between things ‘breaking’ and the intensification of Bubble excess. A major de-risking/deleveraging episode could bring this fragile boom to an abrupt conclusion. But it is this acute fragility that ensures policymakers respond quickly and forcefully against fledgling instability (BOE in September and Fed in March), ensuring that deeply entrenched speculative impulses are sustained. That which does not burst a Bubble only makes it stronger.”
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“Historic monetary inflation has altered structures. Millions over the long bull market have become impassioned speculators – stocks, ETFs, options and derivatives, crypto – with the financial resources to stay in the game. Households have been granted Trillions of additional liquid assets and tens of Trillions of additional perceived wealth, while the Fed did exactly what it needed to avoid: its words and deeds further solidified the perception that the Fed is backstopping the markets.”
