{"id":58479,"date":"2021-07-03T10:25:33","date_gmt":"2021-07-03T15:25:33","guid":{"rendered":"https:\/\/olduvai.ca\/?p=58479"},"modified":"2021-07-03T10:25:33","modified_gmt":"2021-07-03T15:25:33","slug":"cornered-fed-weighs-dilemma-market-crash-or-runaway-inflation","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=58479","title":{"rendered":"Cornered Fed Weighs Dilemma: Market Crash or Runaway Inflation?"},"content":{"rendered":"
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Cornered Fed Weighs Dilemma: Market Crash or Runaway Inflation?<\/a><\/h3>\n<\/div>\n<\/div>\n<\/section>\n
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\"Cornered<\/p>\n
Image via Science Photo Library<\/span><\/div>\n<\/div>\n

<\/a>The U.S. economy is at a fork in the road.<\/p>\n

One route leads to the return of market fundamentals and sane stock valuations, at the cost of a historic market correction.<\/p>\n

The other route leads to runaway hyperinflation that eats up the debt almost as fast as it devours the dollar\u2019s buying power. That would likely cause the dollar to lose its\u00a0hegemony as global reserve currency<\/a>\u00a0and<\/em>\u00a0bring about a simultaneous market collapse.<\/p>\n

Here\u2019s where we are, and where we might be going\u2026<\/p>\n

How did we get here?<\/strong><\/p>\n

For the most part, through\u00a0Fed interventions<\/a>\u00a0that suppressed interest rates for the last 13 years, creating artificial demand for U.S. IOUs in the form of bonds, and generally maintaining an \u201ceasy money\u201d policy. (And let\u2019s not forget the hundreds of millions of stimulus checks, unemployment extensions, fraud-riddled Payroll Protection Program and the other boondoggles associated with the pandemic lockdown.)<\/p>\n

Now, all this works great. For a while. The Fed came out of the Great Recession with $2 trillion on its balance sheet. Today, over a\u00a0decade later<\/em>, its balance sheet sits at $8 trillion. And climbing.<\/p>\n

Let\u2019s reiterate: This works great.\u00a0For a while.<\/em><\/p>\n

Junk-rated companies are able to borrow massive amounts of money (and\u00a0spend it all on bitcoin<\/a>, sure, why not?) at absurdly low rates, only\u00a03% over the \u201csafe rate\u201d<\/a>\u00a0offered by Treasurys. Everyone who owns stocks made money, at least on paper. We\u2019ve already watched stock valuations climb into the stratosphere as lockdown-addled day-traders\u00a0took their stimmies to the Robinhood casino<\/a>\u00a0to play with the \/WallStreetBets and AMC apes. We\u2019ve seen\u00a0home values skyrocket<\/a>\u00a0(15% annually in April 2021 and currently about\u00a030% higher than the peak of the housing bubble<\/em>).<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Cornered Fed Weighs Dilemma: Market Crash or Runaway Inflation? Image via Science Photo Library The U.S. economy is at a fork in the road. One route leads to the return of market fundamentals and sane stock valuations, at the cost of a historic market correction. The other route leads to runaway hyperinflation that eats up […]<\/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":[18769,303,1849,426,501,839,3650],"class_list":["post-58479","post","type-post","status-publish","format-standard","hentry","category-economics","tag-birch-gold-group","tag-fed","tag-financial-markets","tag-inflation","tag-market-crash","tag-us-dollar","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58479","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=58479"}],"version-history":[{"count":0,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/58479\/revisions"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=58479"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=58479"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=58479"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}