Federal Reserve | timiacono.com - Part 4

Easing is Easy, Hiking is Hard

The recent weakness in major U.S. equity indexes (that now appears ready to continue for the fifth straight day) has surely not escaped the attention of Federal Reserve officials who have been attempting to “prepare markets” for the eventual end of super-accommodative monetary policy but, as shown below via this item at The Fiscal Times the other day, we’ve been down this road many times before since the 2008 financial crisis.

On a completely unrelated note, see this Friday Funny at reason.com that weighs in on the Ted Cruz presidential campaign announcement in The Next Political Messiah.

Like a Ball and Chain

Someday, these post-financial crisis years will be looked back upon as being one of the most damaging periods to the American psyche with soaring wealth/income inequality topping the list of ills due, in large part, to monetary/fiscal policies enacted by TPTB.

Not far down said list is the burgeoning student loan problem that is transforming an entire generation and this CNN/Money story provides a view of things from recent graduates.

Interestingly, I have some first hand experience with this issue recently where a surprising number of ski instructors I’ve worked with over the winter are 20-something recent graduates who, you’d think, should be doing something different at this time.

A common refrain is that the four-year degree is the new high-school diploma and they all dread the student loan bills coming due.

Here’s the chart from about half-way through a highly entertaining Ted talk (due in part to a Tennessee twang) given by hedge fund billionaire Paul Tudor Jones depicting where the U.S. stands on a measure of inequality via-a-vis social ills (go here for the entire clip).

It’s not clear how that left scale is calculated, by my guess is that the American obesity epidemic is what puts this nation off the chart.

Of course, the headlines that were generated from this talk had to do with how situations like those depicted in the chart are resolved and I’ve obliged in the title above.

Conundrum 2.0

With the prospect of Federal Reserve rate hikes arriving sometime later this year comes talk of a possible conundrum similar to the one faced by former Fed Chief Alan Greenspan about a decade ago when short-term rates were nudged higher (baby-steps) but long-term rates didn’t budge. Of course, this was prime-time for one of the greatest asset inflation blow off tops in history, so, we might have that to look forward to again in the period ahead.

This topic is discussed in a Wall Street Journal story ($) today that includes the graphic below with another conundrum as indicated in red.

Also see this New York Times 3-D yield curve interactive graphic in which the U.S. public debt market looks rather normal as compared to what’s going on in Japan (length of time for unusually low rates) and Germany (recently negative rates with no end in sight).

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