{"id":15314,"date":"2015-12-16T06:58:35","date_gmt":"2015-12-16T11:58:35","guid":{"rendered":"http:\/\/olduvai.ca\/?p=15314"},"modified":"2015-12-16T06:59:40","modified_gmt":"2015-12-16T11:59:40","slug":"a-full-trunk-of-combustible-junk-the-wages-of-zirp","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=15314","title":{"rendered":"A Full Trunk Of Combustible Junk\u2014\u2014The Wages Of ZIRP"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"http:\/\/davidstockmanscontracorner.com\/a-full-trunk-of-combustible-junk-the-wages-of-zirp\/\" target=\"_blank\">A Full Trunk Of Combustible Junk\u2014\u2014The Wages Of ZIRP<\/a><\/h3>\n<p class=\"entry-meta\">Shuffling uncomfortably\u00a0with paint brushes in hand in the\u00a0tight monetary\u00a0corner into which they have\u00a0painted themselves, our monetary suzerains are about to demonstrate the folly of their\u00a0seven-year stint of \u201cextraordinary\u201d policy accommodation.<\/p>\n<\/header>\n<div class=\"entry-content\">\n<div class=\"pf-content\">\n<p>Even as ZIRP and QE have failed to rejuvenate the main street economy,\u00a0they did\u00a0trigger a far-reaching scramble for yield that has now left the casino bobby-trapped with FEDS (financially explosive devices). The current\u00a0rumblings in the\u00a0junkyard are just the warning signs of the explosions sure to follow.<\/p>\n<p>These little nasties are not the product of free financial markets and honest price discovery; they are the deformed off-spring of\u00a0relentless financial repression and the\u00a0systematic falsification of prices in the money and capital markets.<\/p>\n<p>As shown below, the volume of outstanding high yield debt has reached record levels; and more importantly,\u00a0it has climbed\u00a0in a\u00a0relentless progression over the Fed\u2019s serial bubble cycles.<\/p>\n<p>On the eve of the dotcom collapse, there was about $375 billion of high yield bonds and bank loans outstanding\u2014-a figure which was not in the slightest set back by the dotcom crash and recession which followed.<\/p>\n<p>In fact, by the time Greenspan had slashed money market rates from 6.5% on Christmas eve 2000 to 1.0% by the end of 2003, the amount of high yield debt outstanding had doubled to $700 billion; and it\u00a0eventually grew another half trillion dollars as the housing\/credit bubble inflated, reaching $1.2 trillion by 2007.<\/p>\n<p>During the Great Recession the level of outstandings plateaued during, but there was no purge of the\u00a0rot or liquidation on a net basis of the excesses that had been generated during the Greenspan housing\/credit boom.<\/p>\n<p>Instead, it was rolled over in a vast refi operation triggered by ZIRP and the Fed\u2019s massive suppression of bond yields via QE. Specifically, leveraged bank loan balances\u00a0were paid down by about 10% between the 2007 peak and 2010 to about $500 billion.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>A Full Trunk Of Combustible Junk\u2014\u2014The Wages Of ZIRP Shuffling uncomfortably\u00a0with paint brushes in hand in the\u00a0tight monetary\u00a0corner into which they have\u00a0painted themselves, our monetary suzerains are about to demonstrate the folly of their\u00a0seven-year stint of \u201cextraordinary\u201d policy accommodation. Even as ZIRP and QE have failed to rejuvenate the main street economy,\u00a0they did\u00a0trigger a far-reaching [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5979,2120,303,305,534,661,662,1940,1939],"class_list":["post-15314","post","type-post","status-publish","format-standard","hentry","category-economics","tag-contracorner","tag-david-stockman","tag-fed","tag-federal-reserve","tag-monetary-policy","tag-qe","tag-quantitative-easing","tag-zero-interest-rate-policy","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15314"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15314\/revisions"}],"predecessor-version":[{"id":15316,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15314\/revisions\/15316"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}