I get that interest rates increasing creates short term pain in the stock market, but what I just described sounds inherently unsustainable to me and our historical models seem like they are flawed because of the unprecedented capital generation we saw last year.

And I just don’t know how long you can expect institutions to put meaningful amounts of their treasury reserve in an treasury note with negative real yield tbh, when a host of equities seem incapable of meaningfully decreasing in value with this new paradigm and have much better real yield compared to the cost of capital.

Sounds to me like bad fiscal policy got us stuck between a rock and a hard place

This post was edited on 4/8/21 at 8:02 am

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Posted by wutangfinancial

Treasure Valley

Member since Sep 2015

11196 posts

Posted on 4/8/21 at 8:20 am to Ross

quote:
Sounds to me like bad fiscal policy got us stuck between a rock and a hard place

It's actually bad monetary and fiscal policy in unison. You can't target stable prices and low unemployment by mandate and NOT concentrate wealth like we have. You need the volatility and creative destruction that comes with it to prevent the situation we're in. Something like 20% of the S&P are zombies but survive insolvency by rolling debt at rates their credit shouldn't allow them to. Luckily the entire global banking system relies on our Treasuries. We're just weak minded people in general. In 01 nobody noticed, in 08 people would have cried with a corporate bailout and cried more without one. In 19 there would have been riots if the public knew and in 20 nobody cares because stimi payments. All creating the zombie economy we probably won't ever escape. Adding the human element of politics makes everything so much worse.

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