Article: Fed reinforces its bad money regime as double recession looms
Dr. Brendan Brown, founding co-partner of Macro Hedge Advisors, senior fellow at the Hudson Institute, and member of the Ludwig von Mises Institute Europe Editorial Board, recently sat down for a Q&A moderated by Stephen Martus CFA, the other founding partner of Macro Hedge Advisors.
The long-term US fixed-rate market is now broken, dysfunctional and all signalling functions corrupted by Federal Reserve manipulations.
Moreover, there will be no fix any time soon. Instead, the Powell Fed is promising an intensification of the 2 per cent inflation standard and sharpening of non-conventional operating tools.
Much of the Fed’s apparent power to manipulate long-term rates is, in fact, phoney – it depends on market-participants believing it has the power when it does not. This is an Emperor’s New Clothes Story. And so long as it plays, there is a dynamic instability in this marketplace.
The view here is that when a robust economic recovery emerges and/or when consumer price inflation pressures build, the Fed cannot prevent a sharp rise in long-term rates. This prospect will, at times frighten markets, even well before those new possible realities emerge.
Meanwhile, the broken long-term interest rate market spreads havoc in the broader marketplace and the global economy.
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