|»Vivek Kaul's Diary|
Central Banks' $13 Trillion Problem
21 APRIL 2017
GUALFIN, ARGENTINA - The Dow was down 118 points yesterday.
It should be down a lot more.
Of course, markets know more than we do. And maybe this market knows something that makes sense of these high prices.
What we see are reasons to sell, not reasons to buy.
| --- Advertisement ---
We're Down To Our Last Few Copies...Hurry!
Over the past few weeks, hundreds of my valued readers have claimed their personal hardbound copy of my new Book - India's Big Government.
But now, we're down to our last few copies...
And we will be forced to close this offer as soon as the last copy is claimed.
So, don't delay and click here for full details.
Foot traffic in chain restaurants is dropping, too. It's down 3.4% from last month year over year.
And all across the country, retail stores are closing their doors and shuttering their windows as though a hurricane were coming.
And maybe it is...
Household debt is once again at more than $14 trillion - the level that set off the crisis of 2008-'09. At that level, consumers have a hard time spending.
Despite these warnings, the Fed is still patting itself on the back. Bloomberg:
The economy continued to grow across the U.S. at a modest-to-moderate pace in recent weeks as a tight labor market helped broaden wage gains, though consumer spending was mixed, a Federal Reserve survey showed Wednesday.
Not only that, it is still talking about undoing the damage it has done over the past eight years... hoping to get down from its debt-mountain perch without breaking any bones. Bloomberg again:
After heading into the uncharted territory of quantitative easing [QE], the world's central banks are starting to plan their course through the uncharted waters of quantitative tightening.
How the Federal Reserve, European Central Bank and - eventually - the Bank of Japan handle the transition could make the difference between a global rerun of the 2013 'taper tantrum,' or the near undetectable market response to China's run-down of U.S. Treasuries in recent years.
Combined, the balance sheets of the three now total about $13 trillion, equating to greater than either China's or the euro region's economy.
Central banks began buying debt eight years ago. Now they own $13 trillion of it.
Hey, it was fun, wasn't it?
Nothing bad happened. So now they can get rid of the debt...and nothing bad is going to happen again, right?
The Fed bought the debt - adding money into the economy...especially the richest part of it. Now all they have to do is sell it. Easy-peasy.
A lot of people have a spare trillion dollars lying around. They'll consider it an honor to help the Fed down off the ledge...and buy bonds just as the bond market turns south.
The hangover will be just as much fun as getting drunk.
The divorce will be just as exhilarating as the affair that caused it.
Getting hanged for murder will be just as satisfying as shooting the bastard.
© Equitymaster Agora Research Private Limited