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Market Tells The Fed, You Must Raise Fake Funds Rate 100

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15 minutes ago, DrStool said:

The market now says 100 basis points right now, or else. 

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Dealers Assume the Position, as 75 BPs Coming Wednesday

I’ve been thinking they could go surprise  interim hike. “Volker Light” massacre. 75 or 100. To try to reclaim the narrative and convert non-believers, and thereby ultimately curtail hikes sooner/lower. 

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Just now, potatohead said:

Lee could some of this move be a repo/liquidity  crisis rather than market just pricing in the Fed?

The market does not "price in." It responds to the supply of, and demand for money. Liquidity was tight to begin with, and now the Fed is withdrawing money from the system. This started accelerating concurrent with those Fed withdrawals. 

Crisis? Hell yeah, it's a crisis. It's been a crisis for the past 13 years. This is just the culmination of years of insane policy. There's no other way that this could have turned out. None whatsoever. This ultimate just had to happen. 

The only thing that's sort of amazing to me is how long it took for inflation to explode. But that's because the Fed and government policy were directed toward financial asset inflation, not consumer inflation. The pandemic forced them to do helicopter money, and we finally got CPI inflation. If housing was in CPI, they never could have gotten away with QE as long as they did. The recognition of inflation would have come years ago, which would have forced the Fed to tighten then, rather than adding fuel to the fire for years more. 

Fucking insane policy. What's happening now is the inevitable result. 

Supply and demand always rule. When the Fed began dropping QE below 85% of Treasury supply, the die was cast. The verdict was sealed. The bill has come due. 

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8 minutes ago, Jimi said:

I’ve been thinking they could go surprise  interim hike. “Volker Light” massacre. 75 or 100. To try to reclaim the narrative and convert non-believers, and thereby ultimately curtail hikes sooner/lower. 

Rate hikes are a sideshow and a smokescreen. The supply of money is the issue. As long as its insufficient the price of money will keep rising, and the Fed will keep rubber stamping. 

It's probably inevitable that the Fed will need to play catch up with rates, with interim rate hikes. It's also inevitable that the Fed will be forced to reverse policy, while somehow giving lip service to fighting inflation. 

I'm not smart enough to see how they can wiggle out of this without one of two outcomes. A financial panic and crash similar to 1929-33, or a hyperinflation. 

If they choose the latter course, it will be interesting to see how stocks perform. The bond market should be fun too. 

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2 minutes ago, Jorma said:

So why exactly are $2.2TN  sitting in RPP's at .5% when 90 Day bills are at 1.74?   Now personally I think the USA may be a dodgy proposition in coming years but 90 days?

That is why I thought we could be seeing a repo/collateral crisis

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Doc is one of the few who nailed this. The disbelieve in this bear market was sky high among market observers.

Right now the consensus among those analcyst who saw none bear market comming seems to be:

- We get a HUGE bounce right after Opex on Friday (a „Turnaround Tuesday“ next week seems to be an absolute given)

- The FED will reverse course VERY soon

- Peak inflation is in

- The low for stocks is more or less in

Why should those folks be correct this time? They saw nothing of this comming. They even didn‘t get that the FED will be forced to hike and therefore „long Bonds“ will NOT work in times of stress like it did for the last 40 years.

They didn‘t get that the energence of SPACs is THE sign of the final top of the bull, that Bitcoin as such is nothing else but the brood of gigantic excess liquidity, that that goddam Fund of that goddam MILF did only work because of excess liquidity and so on and on…

So after all, they didn‘t get anything right, but now they will be right. Right?

 

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