Mac wrote:
My point is that further rate cuts HURTS the banks rather than helps them. They need to deleverage their balance sheets and sell down some loans on their books.
But since most loans are floating, every time the Fed cuts, yields on loans drops, which means that banks have to take further haircuts to try and sell down their book. So perversely, rate cuts at this point hurts the financial system rather than helps it.
Of course, I don't think Washington or the Fed sees it that way.... but that's what I'm seeing / hearing from the best guys in the business on Wall Street this week.
Rate cuts at this point are not reflating assets, but is accelerating inflation in things we consume.
Thus, rate cuts are not helping asset prices, but they hurt the consumer as they pay more for food and gas, leaving less money to buy anything else or to pay down their current debt balances.
The Fed will cut, but I think it is negative in the long run rather than positive.
I think we're seeing the oversold bounce now, but I can't see us breaking 1400 in the S&P 500 for a long time to come.....
J wrote:
mac, you may well be correct about the increase in hurt of banks as short rate droops further. otoh, there are other dire issues at the burning stake, amongst which are all the unstoppable (at least hard to stop) spending that must be financed by the debt which must asymptotically reach for infinity, meaning more, not less, cash must circulate just to keep the economy from utter and absolutely desperate implosion, or as the french experience during the time of Fiat Money Inflation, that each release of 'money' however great in quantity, was but as a drop of cold water to a parched throat.
we have, simply put, run out of simple solutions.
one can save the bank balance sheets and watch the economy implode
one can nationalize the banks and so make sure that all will be engulfed and sink to the abyss while holding hands
one can let the banks go, try to save the economy, meaning making it actually productive and do the right thing in the biblical sense, and kiss the empire goodbye
etc etc
but one cannot not do it all, if we indeed are inexorably gravitating, spiraling, vortex-ing into the end-game stage of the messy affair
i happen to think all can still be held together for another 10+ tears, but in so doing, the babyboom middle class is toast - it could be that the babyboomers are toast, and the boomlets are cinder, just that the drama will be played out in slow and excruciating motion - this is typically what happens with paper money experiments at the end stage, unless it ends suddenly in conflagration of war
in my computer game play on-line, where war is fought hard, bloody, and in the first person, the end-game is invariably a surge against the weakened, when all preparations fail, in concert, as if choreographed for a movie, as the players interact for the last round
for the weakened, resistance is futile, as economic nature and financial gravity take hold and not let go.
figure the usa economy ought to have a natural size of 4 trillion (pick a number, whatever it is, it is not in PPP the current number), and the reverse leverage to naturally bring it to balance involves a liposuction of 8 trillion, give or take;
resisting the liposuction with intravenous and artificial fat injection will merely prolong the agony.
to put simply, we may well be into a phase where the patient is experiencing simultaneous failures of all major organs, and what ameliorates the condition of one pumping heart proves debilitating for another quivering liver.
given the universal nature of usd, the pain will be shared, by all, except those mad enough to 100% gold allocation.
my working thesis, and so watch and brief as road markers go by. so far, so predictable, broadly speaking, though i admit, the speed of progress was slow and is fast.
stop messing around, seek salvation, and sincerely buygold, for it is still dirt cheap, even though it is one working parachute out of 10 packs on a doomed airplane with 200 passengers.
oh, yes, good morning to all :0) |
