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I read this article on Zero Hedge today, which confirmed what we already know:
https://www.zerohedge.com/markets/doom-loop-i-bringing-demand-forward-will-no-longer-save-us
Keeping interest rates near zero for the past 15-years since the Great Recession of 2008 was a bad idea. It made money easy to borrow for both consumers (used to be called citizens), corporations and governments and encouraged malinvestments and debt loading. Savers got hurt and speculators got rich sometimes.
We need to keep interest rates at a higher rate for the foreseeable future. Bailing out corporations and individuals is a bad idea supported by bubbles around the world in every asset class. Watching stocks, bonds, cryptocurrency and gold all rise at the same time made my head spin, not to mention the incessent rise of real estate. Price discovery is hard when the FED basically controls the markets with speeches and the lockdowns nuked the real economy in March of 2020. We are adrift in uncharted waters.
Inflation and malinvestment have been rife as Central Bankers lost control. Corporations have gorged on cheap money for so long that these rising rates are akin to an addict going cold turkey off Xanax. Banks have actually failed and more are likely insolvent. It just doesn't make sense to believe the banking system is stable at this time. Bond portfolios adjust over time and the sheer size of the assets under management by the big banks give a semblance of stability akin to a house with its foundation made on sand.
Could cryptocurrency help clean up this mess?
It could if centralized companies stay out of it. Leveraging cryptocurrency and taking on too much risk blew up FTX, Celsisus and other firms. If cryptocurrency was allowed to be used as it was intended, we could right the ship. There's a reason why Bitcoin was made in 2009 after the banks dropped the ball on the mortgage market. The impending Bitcoin ETFs are speculative and will be leveraged in the hands of Wallstreet, so I think we will see more centralization and manipulation.
Bitcoin ETFs are contrary to the original mission of the underlying asset. I also think that gold and silver ETFs are as well. It's been said a million times before, but if you don't hold the asset you don't own it. Wallstreet wants to use these assets to make money, which I understand and Mainstreet wants to use them as well, since paychecks haven't kept up. Most people live paycheck to paycheck here and it looks grim as unemployment numbers came in as high as October 2021.
The FED Won't Pivot
The most interesting part of this whole thing is the belief that the FED will "pivot" and drop rates soon. People in real estate and Wallstreet have been vocal about this, but the US FED and BOE have committed to higher rates, and JPOW made mention about their commitment to the plan. Hopeium is a hell of a drug, and the FED could pivot someday, but Wallstreet is finally accepting their free ride is over. This selloff looks more serious, but time will tell.
Stay liquid my friends.
