<is it hard to guess that the Fed will pick Door Number 1?>
I think it's pretty much the consensus that they "tighten lite", and even I buy into that. But the fact that the dance floor is pretty crowded with the "tightening lite" crowd, definitely concerns me.
But even if they end up tightening more aggressively, I think it's too late, they are now largely irrelevant. The three primary events that are unfolding, and in no particular order (or perhaps all at once)are:
Train Wreck I (inflationary shortages, and bottlenecks),
Train Wreck II (consumer falls out of bed, mostly because of higher subsistence costs, and a little more difficulty borrowing to pay for it),
Train Wreck III (an inflationary panic in the debt/bond securities markets).
Right now the Treasury market has bought a little time, because the financing requirements are down for a couple months. But starting in July (*), there will be over $50 million a month in new debt Treasury fundings required. The BOJ will have to be back very aggressively, and I just don't see them doing the $50 billion a month deal again, they've shot their wad.
(*)Until then, I'm calling the period between now and July 4th, the "Train Wreck killing fields". |
