Tuesday, 23 February 2021 14:16

Is Jay Powell "The Yield Shield"?

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Is Jay Powell "The Yield Shield"?

Authored by Sven Henrich via NorthmanTrader.com,

Is there no limit to monetary interventions? Are they forever consequence free? Can every economic and market problem be solved by ever more intervention?

Anyone like myself that has questioned the efficacy of the ever more aggressive interventions we see from crisis to crisis has found these questions to be moot as time and time again central banks have shown to successfully not only erase any corrective activity in markets but also propel markets to ever new highs irrespective of any earnings growth issues, valuations or fundamentals.

Indeed central banks will likely see themselves validated as the expected growth picture that is emerging looks to be the most positive in 55 years:

Very possible we're looking at a 2-year real GDP stretch with *average* annual growth of 6-7%+. Hasn't happened in 55 years. https://t.co/J59apM6eZ8

— Conor Sen (@conorsen) February 22, 2021

Yet suddenly we are seeing wobbles in markets. Why? Because of the velocity of inflation expectations and correlated speedy rise in yields.

I’ve been of the view that central banks have and continue to overdo it on the liquidity front. With the double down effect of fiscal stimulus and monetary stimulus they have completely perverted the entire globe financial market system and have created historic excess.

And yes, I submit this is a perversion:

US M1 money supply has increased by 71.5% in one year.
Markets joined at the hip. pic.twitter.com/PkYHUQQm89

— Sven Henrich (@NorthmanTrader) February 20, 2021

Yet with unlimited artificial liquidity and government handouts I suppose you can print any GDP you’d like. If only our ancestors had known this, we could’ve...

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