Loading ...The bailouts are better described as organized protection racket run by banks, hedge funds, private equity investors & large corporations.
By Karen Parker Feld, The Irreverent Economist at Paladin Advisors:
The Fed has used the coronavirus crisis to double down on a failed strategy of supporting financial markets while the real economy declines. Our latest Quarterly Market Outlook & Strategy letter describes the consequences that are likely to result. It’s called, “Through the Looking-Glass,” because whenever Alice (aka Karen) peers through the mirror at our financial markets, she sees that everything is reversed. We are definitely running the Red Queen’s Race now.
Our cyclical models suggest we are, perhaps, a third of the way through the stock market’s re-pricing, although the Federal Reserve’s asset-purchase programs make any kind of market forecast hazar
The inexorable rise in the ratio of US debt to GDP is prima facie evidence of the unfortunate fact that most of the funds borrowed over the past few decades—by households, corporations and the government—were not put to productive use.
The Fed, like the European Central Bank, and the Bank of Japan before it, has tried to generate inflation through easy monetary policy, with the goal of reducing the real burden of our massive debts.
However, all attempts have been self-defeating, because the extra liquidity encouraged ever more unproductive borrowing, which can never be repaid. Inflation cannot be marshaled to reduce debts in a liquidity trap; it will only arrive once these have been written down.