President Trump: The NEW one and only politics thread

Of course the crazy move over the last month in yields (and it has zero to do with inflation) has been on the long end of the curve -- taking the 10 year and the 30 year up dramatically. And the Fed doesn't control, or "raise" those yields with the overnight rate. They are stuck following the market unless they directly intervene (via asset buying) and set price controls. They did hold down yields for a decade, by buying up $4.5 trillion worth of bonds (and driving yields down to a low of about 1 3/8 on the 10 year at the low). They are now trying to end that scheme. And the ECB and BOJ, which are still buying up debt assets (and in the case of Japan, outright buying equities) have made it clear that they want to extricate themselves.

Their problem is that an immense amount of debt that has built up worldwide, much of it really poor quality. It's a way bigger problem that people realize -- at least until the credit crises hit. The entities that have borrowed (corporate, some governments, consumers) are going to drown in their debt if real rates reach the neutral rate -- wherever that isAnd that is going to happen, either with those central banks allowing it to happen, or them losing control and the market doing it in a very disorderly way.

The last time this started to happen, in 2015, a confluence of things happened to allow the charade to go on a bit longer -- making the misallocations of capital on the back of the trillions of dollars of credit they have created out of thin air that much greater (almost 3 years worth). The Fed handed off the asset buying (or quantitative easing, as they call it) to the European Central Bank and the Bank of Japan, then, which became the prime global credit creation machines, taking the baton from the Fed. Then Trump got elected and passed a massive tax cut, and that led to massive stock buyback programs with the found money. By then, in stocks, it had become a mania over 5 to 7 years. And the mania took it to valuations that are scary.

Unless the world's central banks can figure out how to keep creating more and more credit (while destroying global currencies) again, the market (what a concept) is going to wrestle control of longer term rates from their control. If that happens, stocks are going down a lot more than this. It is going to shock people. This is the biggest bubble they have ever engineered. They can try the plunge protection team, but that can only give temporary relief -- UNLESS central banks can figure out a new scheme to institute price controls on long-term yields, and keep credit flowing to every dogshit entity on earth. EVENTUALLY, sooner or later, that ends with a credit crisis, unfortunately.