The Feedback Loop Between The Fed & The Elite

Such has ensured the continuation of “bad behaviors.” 

Unfortunately, given we have a decade of experience watching the “wealth gap” grow, the next decade will only see the “gap” worsen.

The obvious question we should be asking is:

“If we are in a booming economy, as supposedly represented by surging asset prices, then why are Central Banks globally acting to increase financial stimulus for the market?”

The trap the Fed has fallen into is that markets are predicated on ever-cheaper cash being freely available. Even the faintest threat that the cash might become more expensive or less available causes shock waves.

Feedback Loop Fed Elite, #MacroView: The Feedback Loop Between The Fed & The Elite.

Such was seen in late 2018 when the Fed signaled it might increase the pace of normalizing monetary policy. The markets imploded, and the Fed halted its plan of shrinking its balance sheet. Then, during the pandemic, the Fed flooded the system with liquidity to halt a market crash.

Equality In Misery

The reality is the Fed has left unconventional policies in place for so long after the “Financial Crisis,” the markets can no longer function without them. Risk-taking, and the build-up of financial leverage, have removed any ability to “normalize” monetary policy. At least not without triggering violent market convulsions.

Given there is too much debt, too much activity predicated on ultra-low interest rates, and confidence hinging on inflated asset values, the Fed has no choice but to keep pushing liquidity until something eventually “pops.”

Of course, it will be the bottom 90% that absorbs the losses. As noted by Sven Henrich previously:

“In a world of measured low inflation and weak wage growth easy central bank money creates vast price inflation in the assets owned by the few making the rich richer, but also enables the taking on ever higher debt burdens leaving everyone else to foot the ultimate bill.”

Feedback Loop Fed Elite, #MacroView: The Feedback Loop Between The Fed & The Elite.

That is the measured outcome of the central bank easy money dynamic. After decades, it has now taken on new obscene forms in the past 10-years with absolutely no end in sight.”

For the world’s elite, their view of the world is far different than the reality the rest face.

Of course, this also explains much of the recent election outcomes.

When “capitalism” isn’t allowed to work for the “equality” of the whole, the populous will “vote” themselves “equality in misery.” 

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