Ep. 543 – Fragile Markets

The Kapital News
The Kapital News
Ep. 543 - Fragile Markets

A large sell-off today occurred across the major stock indexes as global bond yields continue to rise. The US 10 year note hit 1.6 percent earlier in the trading session and is now around 1.5 percent. Some are arguing that this is a sign of growth, which is causing the rise in yields. Well if this was attributed to growth, then why would stocks sell-off some 2-4 percent today? Stocks are supposed to be vehicles of growth, no? The more realistic answer is because it is not growth expectations, but rather inflation expectations, as well as the inflation that already exists. The effects of inflation will prove destructive over the coming years.

Earlier this week in testimony before Senate and House committees, Jay Powell, Chair of the Federal Reserve, declared that there is robust demand for US debt. The Treasury auction that occurred today saw poor performance and demand to say the least. That is to say, not much of a bid, so prices dropped and yields rose. This is a phenomenon that will be witnessed more and more around the globe as the only buyer (or major buyer) of government debt is going to be that country’s respective central bank. Rising yields are causing much concern in central banks around the world. After all, their entire plan was to get interest rates and yields to record lows in the hopes of stimulating the global economy. US mortgage rates hit a six month high, while prices are at record highs and continue their climb. So what can they do now? In order to push these yields back down, central banks will have to go back into the markets and purchase this debt, bid up the price and push down the yields. Of course, this is all inflationary by its very definition, as central banks will have to expand their money supply in order to do so. In effect, this is monetary authorities, fighting inflation with inflation. They are trapped and they know it.

The Kapital News has been saying for the last two years since we have been online that one day the markets will say enough is enough to these radical fiscal and monetary policies. And that this would be witnessed with rising yields. We are not saying that the end of the road is right here, but we are getting closer, and this is what one would expect to see. When the markets call out these central authorities, and they attempt to utilize the same policies, but no longer get the expected return, such as rising stock markets, then this will be the time when we know that the clock has run out of time. Look out below. What is also a near certainty is that it will take a lower yield on bonds, and lower market interest rates to pop these bubbles. This is because the economy and various markets are extremely fragile. Recall in Q4 of 2018 that the stock market dropped nearly 20 percent because the Fed dared to taper their balance sheet and increase interest rates. The Fed Funds Rate was around 2.25-2.5 percent and the US 10 year note was around 3.25 percent. Those levels could not be sustained within the US economy nor the stock market in 2018. With even greater levels of debt and millions of Americans out of work, and countless numbers of businesses closed, it will take even lower rates to bring the economy and markets to its knees. The markets know this. Central authorities know this. They are scared. And they are trapped.

Initial jobless claims for the week ending 20 February came in at 730,000 on a seasonally adjusted basis. The prior week’s figures were revised downward by 20,000 to now sit at 841,000. The number released today is the lowest figure since last November. However, this is still some 80,000 higher that what was experienced during the depths of the GFC. For all unemployment insurance programs, some 19 million Americans are still claiming benefits. This gives us a de facto unemployment rate of 13.4 percent, which is double the official rate at 6.7 percent. The Federal Reserve’s balance sheet hit a new all-time high at $7.59 trillion. Weekly all-time highs are likely the norm throughout the remainder of this year as the Fed remains committed to purchasing $120 billion worth of Treasuries and mortgage-backed securities. This will take the balance sheet to at least $8.5 trillion and The Kapital News projects a figure closer to $10 trillion. M1 and M2 money stock figures are also around all-time highs and both measures have been updated, definitionally speaking, by the Fed. New data sets have been created and the older sets have been discontinued. Always moving the goal posts. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Debt #Inflation #Markets #Bonds #Gold #Silver #USA #Liberty #EndTheFed #bananarepublic #Commodities #FireCongress #Fraud #Bubbles #Leadership

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