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bucolic_frolic

(47,963 posts)
1. Fed is trapped by its own looming financial crisis
Sat May 20, 2023, 06:46 AM
May 2023

Recall the housing asset bubble? Mortgage derivatives sold as sound investments to consumers seeking yield? Well now it's the banks that are seeking yield in T-Bills, so much so they don't have the cash to support bank runs. There is so much money no one knows what to do with it. Cash is a hot potato. As a result banks are as shaky as consumers seeking yield in 2008. The Fed is powerless. They have no tools remaining. They can't expand the money supply, they can't contract the money supply. They announced that the banking crisis may preclude the need for more interest rate hikes. Good luck with that. Let me translate for you: We're powerless so we'll sit and wait and hope for the best. Expect stagflation, higher inflation, bank meltdowns, and market weakness.

This post just my opinion.

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