It feels as though a crisis of confidence is brewing.
- What will happen when the Bank of England stops buying long bonds?
- Can the U.K. run its version of QE while inflation is climbing?
- How high will the Dollar climb?
- How low will earnings and economies fall?
- Will Credit Suisse fail?
- Will the Fed pivot? (I believe Fed dove Lael Brainard is positioning herself to take over for Janet Yellen as Treasury Secretary after the mid-term elections. Her dovish commentary is her appealing to the Biden Administration). I believe Powell will continue to lift rates and push yields higher until something breaks in the U.S. bond market. (i.e. a liquidity issue).
- Will China invade Taiwan after October 16th?
Inflation is slowing in the U.S., no doubt. Yet, I believe Powell wants to break the “Fed put” as much as he wants to break inflation, even if that means (God forbid), that the U.K. suffers. 20 years of awful policy is to blame for the U.K.’s woes. Pension funds buying on margin to increase yield is one of the distortions of the U.K.’s terrible fiscal and monetary policy (U.S. fiscal and monetary policy of the past 20 years is almost as awful).