Tue, 06/16/2020 – 14:34
You’d think the Fed governors would have the sense of the political problem they are creating for themselves.
The Fed says it is going to start buying individual corporate bonds https://t.co/CM8c909iSU
— CNBC (@CNBC) June 15, 2020
Pumping up the stock market – supporting corporate bonds will do that – while Main Street suffers is a recipe for sweeping changes to come in the Federal Reserve Act.
We have no doubt a People’s Quantitative Easing (QE) is coming. We had a small taste of it during the COVID crisis response That is a direct credit by the Federal Reserve into individual checking accounts.
Not that we oppose it in political spirit but the economics will be a disaster over the long-term. We can think of much better ways to deal with America’s income and wealth distribution problem but we are already gone down that rabbit hole.
The United States is on the fast track to a Japanese style zombie economy, where the Nikkei 225 is still 45 percent below its December 1989 high, even after massive fiscal stimulus and quantitative easing, which includes direct equity purchases by the central bank. Japan is also a net saver and the U.S. is not.
John Authors of Bloomberg pretty much nails it on today’s Fed announcement,
Meanwhile, the case for intervention is slim, as Brian Chappatta explained forcefully for Bloomberg Opinion.
There was no way the Fed needed to do this…
…In the short run, it grows ever harder not to buy stocks. In the long run, this will look like a mistake.
Or put another way…
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Author: Tyler Durden