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In this video, I discuss what I'm calling the "Elvis Presley Economy," which occurs when the financial system gets so levered that central bank monetary p…
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In this video, I discuss what I'm calling the "Elvis Presley Economy," which occurs when the financial system gets so levered that central bank monetary policy decisions become extremely difficult.
Like Elvis, the Fed can only choose between administering uppers (easy monetary policy) or downers (tight monetary policy).
Easy monetary policy causes asset price inflation and consumer price inflation.
Tight monetary policy causes asset prices to crash, thus hurting tax receipts and necessitating more money printing to monetize government deficit spending.
In this cycle, the Fed will continue to tighten (raise interest rates, taper asset purchases, and maybe even shrink its balance sheet) until something really breaks (stocks, housing, Treasuries).
At that point, the Fed will cry uncle and rev up the money printers again.
Not investment advice! Consult a financial advisor.
High debt/GDP levels:
https://fred.stlouisfed.org/series/GFDEGDQ188S
Fed funds rate:
https://fred.stlouisfed.org/series/FEDFUNDS
Fed's balance sheet:
https://fred.stlouisfed.org/series/WALCL
Fed minutes tanking markets:
https://www.bloomberg.com/news/articles/2022-01-05/fed-minutes-flag-chance-of-earlier-hikes-balance-sheet-rundown
Treasury rates moving higher:
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Latest FOMC minutes:
https://www.federalreserve.gov/monetarypolicy/fomcminutes20211215.htm
US debt clock:
https://www.usdebtclock.org/
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