Original Channel: Wealthion

Video Title: Bill Fleckenstein: The Bond Market Is Taking Away The Fed’s Printing Press

Published Date: 2023-04-06T15:00:11Z

The speaker believes that the bond market has taken control and caused disruptions in the economy. They suggest that the global economy is slowing down, particularly in G7 countries, and that the financial disintermediation and bank failures will have a significant impact on credit creation and the economy. The speaker is skeptical of the Chinese economic data. They mention that the equity market’s strong rally is confusing given the numerous problems in the market. The Federal Reserve’s actions are discussed, with the speaker believing that the Fed’s rate hikes are done for this part of the cycle and that events will overtake them. The speaker also discusses quantitative easing (QE) and its effects on the economy, stating that it leaks into the economy through second and third order effects. They note that the recent actions of the banks are not the same as QE and are less stimulative. The speaker mentions a quote by Nouriel Roubini and agrees with the idea of a hard landing, but believes it is not a certainty. They suggest that the stock market’s trajectory will depend on the bond market and the presence of passive flows. The speaker suggests that the labor report will likely be soft, allowing the Fed to claim that they have done enough for now. They discuss the possibility of stagflation, with high inflation but no real growth. The speaker believes that the stock market is supported by passive bids from companies like BlackRock and Vanguard, and that without this support, the market would be lower. They express skepticism towards the Fed’s ability to control inflation and criticize their handling of the economy. The speaker also mentions the impact of the recent OPEC production cut on inflation and the potential negative effects on the US economy and the dollar. They note that disintermediation in the banking system will continue to put pressure on the banks. The passage discusses various topics related to the Federal Reserve (Fed), inflation, the bond market, and potential actions by the Fed in response. The speaker suggests that the Fed may pause rate hikes but not cut rates unless there is a significant event or economic deterioration. They also mention that if the Fed were to pivot and start cutting rates, it may lose the confidence of the bond market, leading to higher yields. The speaker compares the situation to Japan’s yield curve control (YCC) and suggests that the US may consider implementing YCC as well. Additionally, the speaker raises concerns about the US debt ceiling and the potential impact on confidence in the government and the Fed. Overall, the passage explores different scenarios and their potential implications for the Fed, the bond market, and the US economy. In this conversation, the speaker discusses various issues related to monetary policy and the actions of central banks, specifically the Federal Reserve in the United States. They mention Japan’s implementation of yield curve control and express concerns about the US debt ceiling and the Fed’s balance sheet. The speaker also criticizes the intervention and bailout of certain banks, arguing that it encourages moral hazard. They suggest adopting a monetarist approach and possibly reintroducing a gold standard to address the current economic challenges. They conclude by highlighting the need for government discipline and responsible spending, particularly with regards to entitlement programs. The speaker believes that the next couple of years will be painful, similar to the period between 1979 and 1981. They argue that the high level of debt in the country, lack of responsibility in Congress, and excessive spending without cost benefit analysis are major issues. The Federal Reserve’s policies have allowed the national debt to grow to around $31 trillion without reining in spending. The speaker expresses hope that the country will address entitlement programs like Medicare and Medicaid, which are unsustainable with current demographics and workforce. They suggest that it will take time and broad action to fix these issues, but it may be difficult to achieve due to political obstacles. The speaker also discusses potential liquidity concerns, the impact on the stock market, and the recent weak macro data indicating a potential economic contraction. They mention commercial real estate as an area of concern, particularly for smaller banks and the potential for defaults. Overall, they believe that confidence may be negatively affected by these factors.