"When the Fed buys Treasuries, they're increasing the balance sheet. They're increasing the monetary base and effectively its debt monetization." - David Einhorn.
The current and future situation is one of collapsing credit and collapsing money creation as the growth of deflationary elderly overwhelms inflationary working age growth...
Japan has put together a large-scale stimulus package totaling 26 trillion yen to prop up the domestic economy. Please note, this is equal to $239 billion. For a country the size of Japan, this is massive.
In many ways that is what risk markets are yearning for: forward expectations of QE. Meanwhile, as we wait the risk is that the Fed’s balance sheet can actually temporarily shrink before growing.
Trade wars will continue for years, even decades, until China abandons communism or the U.S. concedes the high ground in global hegemony... neither is likely soon.
When this bubble pops, like all bubbles pop, the remaining wealth of workers and savers, goaded into the market by Washington’s policies of mass dollar debasement, will die a painful death...
... QE4 is coming. The Fed would rather have a cushion of ample reserves against unexpected repo market blow ups than react retroactively with $trillions/month of open market operation purchases.
