Headlines:
No Palatable Exit Strategy For Money Printing/Asset Acquisition Binge.
Even Allowing Bond Holdings To Simply Mature = Rate Ramp…As Federal Debt Diet = Steady
Central Bank Balance Sheet Reduction Chatter = Not Credible As Primary Rationale = To Create “Space” For Future Asset Purchases.
*********************************************
Background:
1. Federal Reserve = Not Department of Federal Government.
2. Federal Reserve = Owned By Member Banks.
3. Prints Money, Without Limitation/Oversight, To Execute Dual Mandate.
*************
1. Federal Reserve Balance Sheet [U.S. Treasuries + MBS] = $4.5T = 118% of Annual Federal Budget.
2. Current Status = Money Print On-Hold + Balance Sheet Size Maintained = Reinvestment of Matured Securities.
3. Interest Payments on Securities Remitted To U.S. Treasury = $100B/Yr…Reduces Annual Federal Deficit By 15%.
4. U.S. Treasury Pays Interest on Bills/Notes/Bonds To The Fed. The Fed Remits The Interest Earned Directly Back To U.S. Treasury.
*********************************************
In 2009 U.S. Federal Reserve Initiates M1 Liquidity “Super-Nova” = 7+ Year Money Print = Termed QE [Quantitative Easing].
Global Central Banks
Global Central Banks Replicate Federal Reserve Strategy.
Global Assets Portfolio > $18T = Almost 40% of Global GDP.
Global Assets = Sovereign Debt + Corporate Bonds + Equities.
QE Ignites Asset Price Inflation But Does Not Transmit To: Traditional Inflation Measures…
Or Meaningful GDP Growth.
Thus…Lower/Inverted/Negative Interest Rates Are Initiated To Further Stimulate Economic Growth.
*********************************************
This Stimulus Strategy = Doomed To Fail As Printed Dollars Crowd-Out Earned Dollars In Global Capital Markets.
Income Generated By Printed Dollars Remitted To Sovereign Treasuries.
Income Generated By Earned Dollars Remitted To Private Sector.
*********************************************
To Thwart Central Banks’ Limitless Money Creation Authority…A Catalyst Is Required.
The Catalyst = Unknown…Likely Broad/Persistent Public Market Tumult/Volatility…Devaluing Global Central Bank Security Portfolios.
The Solution = Probably Political…Stripping Central Bank Powers…Citing Breach of Moral Hazard Doctrine.
*********************************************
The Toughest Questions = Specifically…
- WHEN?
Impossible To Pinpoint…But Getting Closer. - BY WHOM?
Somebody With Power & “Sack.”
Article by Global Slant
