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Looming debt bubble crisis watch

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  • #16
    So the Fed has almost completely capitulated...



    They've reversed their balance sheet from attempting to offload assets to accumulating more assets (and remember, these are probably primarily bad assets, or under-priced securities that the banks are exchanging with the Fed for cash at full market value -- thus the Fed is at the losing end if these deals).

    Thus, they're obviously injecting printed cash back into the financial system, so far to the tune of about $400 bill since March 6th.

    The only thing missing is lowering the Fed funds rate, which is currently at 4.75-5.00%. Keep in mind, US inflation is still 6%. The reason that's notable is because the Fed funds rate is theoretically supposed to exceed the inflation rate to make a lasting difference. Yet we're still about 1.00 bps under inflation with signs of a potential pivot (cut in rates) in the near future.

    In the meantime, panic in the banking sector is still ongoing, with banking known unkowns in the not too distance future.

    Not only have we probably not seen the full manifestation of higher interest rates yet and its full effects in the system, but I personally believe we have yet to see the full manifestation of the inflation that was created years ago and its full effects. We'll see.
    Last edited by seanD; 03-24-2023, 05:53 PM.

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    • #17
      Originally posted by seanD View Post
      So the Fed has almost completely capitulated...



      They've reversed their balance sheet from attempting to offload assets to accumulating more assets (and remember, these are probably primarily bad assets, or under-priced securities that the banks are exchanging with the Fed for cash at full market value -- thus the Fed is at the losing end if these deals).

      Thus, they're obviously injecting printed cash back into the financial system, so far to the tune of about $400 bill since March 6th.

      The only thing missing is lowering the Fed funds rate, which is currently at 4.75-5.00%. Keep in mind, US inflation is still 6%. The reason that's notable is because the Fed funds rate is theoretically supposed to exceed the inflation rate to make a lasting difference. Yet we're still about 1.00 bps under inflation with signs of a potential pivot (cut in rates) in the near future.

      In the meantime, panic in the banking sector is still ongoing, with banking known unkowns in the not too distance future.

      Not only have we probably not seen the full manifestation of higher interest rates yet and its full effects in the system, but I personally believe we have yet to see the full manifestation of the inflation that was created years ago and its full effects. We'll see.
      I think the Fed doing these small incremental increases is fueling the chaos. They are trying to pull the bandaid off slowly and causing prolonged pain rather than just ripping it off quickly. I think one big increase at the beginning would have been better. The market would have been hit hard, but then it would rebounds an go on. As it is now, every few months, just when the market starts to grow, they increase the interest rate and thrown it back into turmoil. It's like they are torturing the economy like a sadist.

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      • #18
        Originally posted by Sparko View Post

        I think the Fed doing these small incremental increases is fueling the chaos. They are trying to pull the bandaid off slowly and causing prolonged pain rather than just ripping it off quickly. I think one big increase at the beginning would have been better. The market would have been hit hard, but then it would rebounds an go on. As it is now, every few months, just when the market starts to grow, they increase the interest rate and thrown it back into turmoil. It's like they are torturing the economy like a sadist.
        Fed typically caters to wallstreet, the banks, and the stock market. Had they done it all in one fell swoop, the shock to the system would have had far worse effects to the market than what we saw in 2022, and the banking failures would have happened suddenly all at once instead of over a period of time.

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        • #19
          Why government regulation won't work and why it wouldn't have prevented this crisis.

          Most people are under the false impression banks just go unregulated and unmonitored, but this is not the case. They're under frequent moderation. The federal reserve, for example, performs annual stress tests on banks, primarily the biggest ones and the ones that likely have the most overleveraged vulnerabilities...

          2022 Federal Reserve Stress Test Results

          Though SVB and some of the other banks that failed weren't on the list (Credit Suisse certainly was however), it doesn't matter because they weren't testing for the right thing. Here's Michael Barr, vice fed chair, admitting this...



          So, if some of the supposed brightest economic minds didn't think inflation and high interest rates would be a problem, then no regulatory body would have thought so either. No government agency would have considered the government bonds SVB was holding to be risky assets that required them to raise more capital to back it up.

          And just how much confidence do you have when you here these dunderheads claim everything's fine and the risk has been solved?

          Comment


          • #20
            Down goes First Republic Bank...

            First Republic’s dramatic slide continues, stock falls nearly 20% as bank looks for rescue deal

            Comment


            • #21
              And while all these banks keep failing, Biden has enabled mortgages to low credit buyers at a discount while charging a premium to people with good credit. It's like they are trying to destroy our economy and society.

              Comment


              • #22
                Originally posted by Sparko View Post

                And while all these banks keep failing, Biden has enabled mortgages to low credit buyers at a discount while charging a premium to people with good credit. It's like they are trying to destroy our economy and society.
                It seems to be a type of bail-out of the housing market, which was starting to show cracks due to high mortgage rates because of Fed tightening. A crashing housing market would make what we're seeing with banks now even worse and the collapse much faster. I'm not saying I agree, but bail-out is just what we do now in our crony capitalist system.

                As far the Biden admin's motive, I haven't really figured that out yet. It definitely appears like they're purposely crashing the economies of the entire western hemisphere, But everything they were doing ever since 2008 with central banks manipulating interest rates and printing money has been a slow build up from that. Everything else plays into that, including our insane government spending and debt accumulation. Even the sanctions against the BRIC countries are coming into play and forcing them away from western currencies. Everything we're seeing now is like reaching a crescendo to all that, sort of like the rollercoaster reaching the peak just before it plunges to the bottom.

                Though it's definitely breathtaking what seems to be happening all at once, there are two many mechanisms involved with this for me to believe one individual or even group of individuals are controlling it all.

                Comment


                • #23
                  Originally posted by seanD View Post

                  It seems to be a type of bail-out of the housing market, which was starting to show cracks due to high mortgage rates because of Fed tightening. A crashing housing market would make what we're seeing with banks now even worse and the collapse much faster. I'm not saying I agree, but bail-out is just what we do now in our crony capitalist system.

                  As far the Biden admin's motive, I haven't really figured that out yet. It definitely appears like they're purposely crashing the economies of the entire western hemisphere, But everything they were doing ever since 2008 with central banks manipulating interest rates and printing money has been a slow build up from that. Everything else plays into that, including our insane government spending and debt accumulation. Even the sanctions against the BRIC countries are coming into play and forcing them away from western currencies. Everything we're seeing now is like reaching a crescendo to all that, sort of like the rollercoaster reaching the peak just before it plunges to the bottom.

                  Though it's definitely breathtaking what seems to be happening all at once, there are two many mechanisms involved with this for me to believe one individual or even group of individuals are controlling it all.
                  Maybe Satan? I don't see any person or group purposefully causing all this collapse but perhaps Satan is behind it all, manipulating the people in charge. Because it sure seems like there is something purposeful behind all this chaos. Making liberals think they are "helping the poor" and "saving the planet" while actually causing society to collapse under debt and regulations.

                  Comment


                  • #24
                    Down goes PacWest Bank...

                    PacWest Bank shares fall more than 50% on report that it could be the next regional bank to collapse


                    Comment


                    • #25
                      Dow drops 200 points, turns negative for the year as bank fears grow

                      Stocks declined Thursday, as contagion fears in the regional bank space were reignited. Investors also digested the Federal Reserve's 25 basis point rate hike and commentary following its Wednesday meeting.

                      The Dow Jones Industrial Average

                      fell 217 points, or 0.6%. The S&P 500 slid 0.2%, and the Nasdaq Composite
                      rose 0.06%.

                      The Dow turned negative 0.1% year to date on Thursday. Declines in Boeing, Disney, Goldman Sachs and American Express shares pulled back the Dow.

                      Shares of PacWest

                      tanked by more than 38%, climbing back from earlier losses which exceeded 50%. The decline came after news that the California bank has been assessing strategic options, including a possible sale, a person familiar told CNBC. Regional bank shares sold off hard, with the SPDR S&P Regional Bank ETF (KRE) dropping 4.8%. Western Alliance tumbled 24.2% and saw trading halted multiple times due to volatility. Meanwhile, Zions Bancorporation
                      lost 11%.

                      There likely won't be a respite for the embattled regional banking sector until the Fed cuts interest rates, said Jeffrey Gundlach, CEO of DoubleLine. Since the closure of Silicon Valley Bank in March, First Republic has joined the ranks of failed institutions and was recently taken over by JPMorgan Chase.

                      "Leaving rates this high is going to continue this stress," Gundlach said on CNBC's "Closing Bell" Wednesday. "I believe with a very high degree of probability there's going to be further regional bank failures."

                      As the Fed pushed through its 10th rate hike in this cycle and the central bank seemed to soften its language on future increases, Chair Jerome Powell said that it may be too soon to cut.

                      "We on the committee have a view that inflation is going to come down not so quickly," he said in his post-meeting press conference. "It will take some time, and in that world, if that forecast is broadly right, it would not be appropriate to cut rates and we won't cut rates."


                      Then you have the debt ceiling fiasco coming up, which I'm certain is going to play into all this and exacerbate everything even more. It's going to become a political football -- Reps are going to blame Biden, and the Dems are going to blame the Reps and Powell (Dems have already been setting the stage for that).

                      In spite of what the "experts" tell you, this is only to get worse in time, and I would be really surprised if the Fed didn't fully pivot (they've already indirectly done so) and start cutting rates.

                      Comment


                      • #26
                        Originally posted by seanD View Post
                        Dow drops 200 points, turns negative for the year as bank fears grow

                        Stocks declined Thursday, as contagion fears in the regional bank space were reignited. Investors also digested the Federal Reserve's 25 basis point rate hike and commentary following its Wednesday meeting.

                        The Dow Jones Industrial Average

                        fell 217 points, or 0.6%. The S&P 500 slid 0.2%, and the Nasdaq Composite
                        rose 0.06%.

                        The Dow turned negative 0.1% year to date on Thursday. Declines in Boeing, Disney, Goldman Sachs and American Express shares pulled back the Dow.

                        Shares of PacWest

                        tanked by more than 38%, climbing back from earlier losses which exceeded 50%. The decline came after news that the California bank has been assessing strategic options, including a possible sale, a person familiar told CNBC. Regional bank shares sold off hard, with the SPDR S&P Regional Bank ETF (KRE) dropping 4.8%. Western Alliance tumbled 24.2% and saw trading halted multiple times due to volatility. Meanwhile, Zions Bancorporation
                        lost 11%.

                        There likely won't be a respite for the embattled regional banking sector until the Fed cuts interest rates, said Jeffrey Gundlach, CEO of DoubleLine. Since the closure of Silicon Valley Bank in March, First Republic has joined the ranks of failed institutions and was recently taken over by JPMorgan Chase.

                        "Leaving rates this high is going to continue this stress," Gundlach said on CNBC's "Closing Bell" Wednesday. "I believe with a very high degree of probability there's going to be further regional bank failures."

                        As the Fed pushed through its 10th rate hike in this cycle and the central bank seemed to soften its language on future increases, Chair Jerome Powell said that it may be too soon to cut.

                        "We on the committee have a view that inflation is going to come down not so quickly," he said in his post-meeting press conference. "It will take some time, and in that world, if that forecast is broadly right, it would not be appropriate to cut rates and we won't cut rates."


                        Then you have the debt ceiling fiasco coming up, which I'm certain is going to play into all this and exacerbate everything even more. It's going to become a political football -- Reps are going to blame Biden, and the Dems are going to blame the Reps and Powell (Dems have already been setting the stage for that).

                        In spite of what the "experts" tell you, this is only to get worse in time, and I would be really surprised if the Fed didn't fully pivot (they've already indirectly done so) and start cutting rates.
                        Feels like they are determined to recreate the early 20th century. First we have a pandemic like the Spanish Flu, and now it seems they want to crash the stock market and start a new Great Depression. Next: WW3. History repeats!

                        Comment


                        • #27
                          Originally posted by Sparko View Post

                          Feels like they are determined to recreate the early 20th century. First we have a pandemic like the Spanish Flu, and now it seems they want to crash the stock market and start a new Great Depression. Next: WW3. History repeats!
                          It's like watching tsunamis approaching at a distance, not knowing exactly how it's going to all play out but that it's going to be really really bad, and knowing there's nothing you can do but brace yourself.

                          Comment


                          • #28
                            Originally posted by seanD View Post

                            It's like watching tsunamis approaching at a distance, not knowing exactly how it's going to all play out but that it's going to be really really bad, and knowing there's nothing you can do but brace yourself.
                            I have taken about half of my retirement funds out of the stock market as a hedge (did it back when the market first started going haywire about a year ago). Of course that won't help if the entire financial system collapses, or we end up with runaway inflation.

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                            • #29
                              Originally posted by Sparko View Post

                              I have taken about half of my retirement funds out of the stock market as a hedge (did it back when the market first started going haywire about a year ago). Of course that won't help if the entire financial system collapses, or we end up with runaway inflation.
                              Yup. I don't have a plan for if the entire financial system collapses or runaway inflation (although I think that is unlikely). I don't think anyone really has an idea of how we'll deal with that until it happens. Probably lots of martial law and government handouts would be my guess.

                              I'm just planning that the market is going down and someday it will start back up.
                              "For I desire mercy, not sacrifice, and acknowledgment of God rather than burnt offerings." Hosea 6:6

                              "Theology can be an intellectual entertainment." Metropolitan Anthony Bloom

                              Comment


                              • #30
                                Originally posted by Thoughtful Monk View Post

                                Yup. I don't have a plan for if the entire financial system collapses or runaway inflation (although I think that is unlikely). I don't think anyone really has an idea of how we'll deal with that until it happens. Probably lots of martial law and government handouts would be my guess.

                                I'm just planning that the market is going down and someday it will start back up.
                                All I know is that when society collapses, the most valuable currency will be toilet paper. :yes;

                                Covid proved that.

                                Comment

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