Projection much, riff raff?
Will the Fed Buckle Under Wall Street's Pressure?
- Thread starter schizo
- Start date
Who owns the FED? Major banks. Do they want to let smaller competitors fail? Anyones guess is as good as mine.
JPow chickened-out in '18.... and look what it lead to.
If he holds to quelling high inflation, we have asset carnage for a couple of years. If he caves, we get left with high inflation for a decade or more. THAT will destroy almost everybody... not just a 2-year pain.
When has the fed ever not responded to asset prices? They most certainly will respond.
Think "Volker". He did the "unthinkable" extreme to squash inflation in the late '70s-early '80s. We need that again... now. And JPow knows it.
Can't recall ever the "UN and everybody else" crying for the Fed to stop hiking rates. It seems everyone is overleveraged on ZIRP and can't afford the carry cost.... that and margin calls, of course.
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Completely agree, but I have also seen the numbers of what these high interest rates are costing the US government on the debt, and there is no way to pay even these interest rates, never mind if they go higher. The difference is that in the 80's, we didn't have this high debt at the government level, so only consumers felt the brunt of high rates. But now, the government can't afford it. So if a pivot doesn't happen, money will need to be printed in order to pay the interest expense. There is literally no way out because both options lead to bad outcomes.
That's the dilemma. A "Hobson's choice" if you will. Either a financial and asset crisis or ruinous inflation. I suspect they will go with the ruinous inflation for a while... suffer a bigger pain later rather than a smaller one now.
Powell technically can't. That would cause high default rates and the banks would fail. It's just not the same as when Volker was pulling the levers. Remember that it's a collection of federal reserve member banks. They don't eat themselves.