The Absolute Size Of The Federal Reserve’s Balance Sheet = Does Not Matter Anymore.
All You Need To Know = It Will Grow…It Seems…Indefinitely…Sometimes At A Slower Pace…But Grow It Will.
Anyway…What Is The Real Point Of Central Banks Supporting Financial Markets With Broad Asset Purchases?
The Belief…Seems To Be…That Higher Financial Asset Prices Boost Consumer Confidence…Thereby Inducing John Q. Public To Spend…Thus Stimulating The Economy With A Demand Impulse.
And Generally…That Is True.
So What’s The Problem?
The Problem = THE CONTEMPORARY GLOBAL ECONOMY LIVES ON A PERMANENT SUPPORT SYSTEM DEPENDENT ON CENTRAL BANK MONEY CREATION…
Yet…THE GLOBAL MONETARY INFRA-STRUCTURE WAS NOT DESIGNED FOR THIS TYPE OF UNRELENTING SUPPORT.
SEEMINGLY INFINITE MONEY CHASING FINITE FINANCIAL ASSETS
…WHICH NECESSARILY DISTORTS RATIONAL PRICE DISCOVERY.
Therefore…INDEFINITELY IRRATIONAL FINANCIAL ASSET PRICES Prevail.
The Central Bank’s Transmission Of Monetary Policy System Has…No Doubt…Changed.
The Rules Have Been Liberalized + The GoalPosts Have Been Widened Quite Substantially.
On Paper….Seemingly Changing For The Worse…As Mounting Sovereign Debt Has Ceased To Be A Legitimate Concern…Since Central Banks Voraciously Consume.
Any Battle To Influence + Pivot Away From The Worst…Even If Armed With Altruism…To This Point…Has Proved To Be Fruitless…
AS THIS NEW Monetary REALITY…EVEN THOUGH IT IS PHONY…MAY NOT CHANGE FOR QUITE SOME TIME…Just No Tactical Incentive To Do So.
Thus…Interest Rates Remain Pinned At Zero + Equities Continue To Launch Ever Higher.
Legacy Valuation Metrics Are Now Considered Archaic + Revenue Growth Trumps Profitability.
It Seems…The Only Barrier To Higher Prices Is That The Markets Are ONLY Open For 6.5 Hours/Day + 252 Days/Year.
Because…For Now…When The Equity Markets Are Open For Trading…They Routinely Move Up + To The Right.
You Might Say… “OK…BUT…WHAT ABOUT RISK?“
I Could Respond With… “What Enduring Risk?”
…That A Central Bank Money Tree Will Not Forcefully Attempt To Alleviate.
You See…It Has Actually Happened…That Odd Thing That Many/Most Market Participants NEVER THOUGHT POSSIBLE…Back In 2009…At The Onset Of QE In The United States.
That Is…QE IS NOW INSTITUTIONALIZED POLICY.
And Is Currently The Pavlovian Response…From Central Bankers…To Cure Any Market Ill.
Apparently Too…QE Can Solve ANY Perceived Market Challenge…Including Covid-19 + Global Warming.
Because…Central Bankers Now Believe ANY Market Disruptive Event Is Nobody’s Fault + That All Shall Be Bailed Out…Regardless Of Their Sloppy Money Management Skills.
Further…Almost Daily…Global Central Bankers Repeat Their Reassuring Message To The Markets…Basically…”We Will Be Steadfast In Our Monetary Support To Most Financial Asset Prices“
…Even Espousing On A Variety Of Subject Matters…Typically Beyond The Bounds Of Monetary Policy…That Now…Absurdly Include Medical Analysis + Virus Prognostications.
But For Now…Despite Their Attempts To Deflect + Divert Away From Their Debt Monetization + Money Printing…
All I Hear Is The Same Tired Sound Bytes From The Global Money Printing Crowd…Echoing Charley Brown’s Teacher =
“WAH…WAH…WAH”…
It’s Just Relentless Blather…But I’ve Provided Interpretations Below:
“WAH WAH WAH” …Asset Purchases
“WAH WAH WAH” …Covid
“WAH WAH WAH” …Balance Sheet
“WAH WAH WAH” …Flatten The Curve
“WAH WAH WAH” …Forcefully Use Our Tools
“WAH WAH WAH” …Herd Immunity
“WAH WAH WAH” …Average Inflation Targeting
“WAH WAH WAH” …Masks
“WAH WAH WAH” …Quantitative Easing
“WAH WAH WAH” …Pandemic
“WAH WAH WAH” …Whatever Is Necessary
“WAH WAH WAH” …Shelter In Place
“WAH WAH WAH” …Zero Interest Rates
“WAH WAH WAH” …Social Distancing
Somehow…Charley Brown’s Teacher…Instructed These Central Bankers Quite Well…
The Enduring + Key Lesson =
The Content Of What You Say To Your Flock Is Completely Irrelevant And Not Subject To Any Scrutiny…Just Keep Saying It And Ignore Any Protestations.
Because Untouchable Authority ALWAYS WINS…Especially When It Comes To Money.
