FEB 7, 2018
It is easy to forget this laughable but incontrovertibly true statement: The Fed, if it is doing its job by the letter of the law, is supposed to supervise and regulate Wall Street.
That it actually functions as a stock market cheerleader and manipulator is such common knowledge that it is difficult to picture The Fed doing anything but using every last trick in its playbook to inflate and then sustain risk-asset bubbles.
Yet time and time again, we see that this is not a sustainable strategy. It always ends the same way. Inflate, inflate, inflate, implode. Jerome Powell has done nothing in his time at the Fed except echo his predecessors’ sentiments about policy and intimate there should be even less regulation for Wall Street.
But it’s all just a matter of time:
This debt creation can’t sustain itself forever. It doesn’t take but a tiny mistake by central bankers to throw the bond markets into disarray.
Equity markets don’t always follow right away, but they will eventually follow. And these past few days, equities marched in lockstep with the spike in bond yields.
“If and when the bubble does pop, however, the deleveraging by lenders could create a credit crunch the likes of which haven’t been seen since the Great Recession.”