re: 3 more yrs of zero interest

Which is a point Stanley Druckenmiller and others have regularly been confounded by pre-COVID:

If headline unemployment is really an accurate gauge of unemployment (i.e. ignoring the degradation in the participation rate), and

If we were truly in the “best economy ever,” and

If consumer, business and government balance sheets were really as strong as advertised, then

Why in the hell was inflation below target and why in the hell did we have to remain in an historically low interest rate environment? One of the major benefits of raising rates during periods of economic strength is so that you can lower them meaningfully during periods of economic weakness.

I attribute that “lower for longer” misstep to two things:

1) First, but less important, (and this is not a political statement, so don’t take it that way), Trump was wrong to pressure the Fed into lowering rates and the Fed was even more wrong for caving in to political pressure.

2) Second, and more to the point, I think the underlying strength of the economy in the first place was an illusion caused by artificially low rates. That made a lot of investors and homeowners and governments and corporations look strong on paper, but it was the kind of strength that was built upon the shaky foundation of capital costs that were lower than what would be expected in a “normal” environment. That’s not good for comps going forward and corporate earnings really haven’t been all that impressive since 2012 anyway, even with low rates.



On a rate-normalized basis, debt service is about as high as it’s been in decades:

LINK

So, that means rates must stay low in an attempt to get the economy to grow faster to lower Debt to GDP. Except, it’s pretty clear Global GDP has been slowing, not growing, so what next? Inflate the debt away and hope retirees (a growing % of the total population) don’t revolt? Or ... take the bitter pill of deflation and finally quit kicking the can down the road.

As I see it, that’s our choice. The Fed has picked their side. The market appears to be continuing to weigh both options.

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what's so funny dude.

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You thinking you're a "thinker."

That's frickin' hilarious. You can't even write a cogent sentence.

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I’d add typically in “great economic environments” you wouldn’t need to have deficit spending at this level on the fiscal side to sustain it. Another obvious point most have chosen to forget, the fed tried raising rates and balance sheet runoff (QT) and that ended in -20% really quick in 2018.

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Two really great points. You remind me we had a “taper tantrum,” too.

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You’d probably enjoy End Game.

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Check out this thread

LINK

Woah, that's quite the thread. Gonna need a minute to digest it. haha