Monday, September 21, 2020

The Last Trump Casino Bailout

I think we all see where I'm going with this...

The Fed made it clear last week that they will be on the sidelines until after the election - which is their standard policy around election time. When the casino imploded in the fourth quarter of 2018 ahead of the mid-term elections they did nothing. In fact, they continued reducing the balance sheet which only made the decline far worse. Which means that today's gamblers are sky-diving without a parachute. 

The Fed also reiterated last week that they believe a fiscal stimulus package is far more important than any additional non-existent monetary stimulus. They didn't actually admit that monetary policy is entirely depleted from an economic standpoint, but with rates at 0%, sans fiscal package to monetize, it's entirely depleted. The Fed also knows that quantitative easing alone merely creates asset bubbles with negligible economic benefit and substantial asset crash risk. Which is likely why the current rate of expansion of the Fed balance sheet ($120b/month) is only running at about one third of the annualized deficit ($3.7 trillion). One could argue that net issuance of Treasury debt is having a tightening bias on credit markets by roughly double last year's repo crisis amount. 

Recall that going into this past summer, gamblers were hanging their reflation hats on another fiscal stimulus package.  And yet when it never arrived, they never stopped believing in fake reflation. And that's because today's top economic cheerleaders particularly in the White House all believe the economy is getting better, hence another economic stimulus package is not needed.

Not everyone agrees. 

"Small businesses are disappearing. Unemployment claims remain unbelievably high. And state and local budgets are imploding. Yet Congress is likely to skip town this month without providing additional emergency aid to the economy, according to Goldman Sachs.

"At this point, a major stimulus package before the election looks like a long shot," Goldman Sachs economists wrote in a note Friday"

"The economy seems to be running out of steam in the last few weeks...Recent data have reinforced an overwhelming view among experts — including Fed Chairman Jerome Powell — that more stimulus is urgently needed from Congress."

All of which means that deja vu of their last election rigging gambit in 2018, the Trump circle jerk has once again reached premature electoral elation.

Compliments of record bullshit. 

"the current dollar net speculator position has dropped to the most bearish standing since November 28th of 2017, a span of 146 weeks"

“Gold should be trading higher on safe-haven demand but it’s kind of a repeat back like in the spring when the market sell-off comes, market participants have been selling off assets across the board,”