The new era of inflation has only just begun
Who Will Buy Bonds the Fed No Longer Wants?
Much as the alleged benefits of quantitative easing resist quantification, it’s impossible to calculate the repercussions of the exit plan in advance.
U.K. hedge fund manager Crispin Odey: “Everybody knows that the West is bankrupt somewhere around interest rates of 3%, so the fight now is how can 0.5% interest rates slow down inflation which is potentially on its way through 10%.”
Marcus Ashworth and Mark Gilbert Bloomberg 8 April
Fed may end up pushing into a recession an economy that,
for too many years, has been conditioned to live with near-zero rates and ample liquidity injections.
Stocks after having benefited significantly from Fed-induced conditioning that made valuations a function of TINA (there is no alternative to stocks), FOMO (the fear of missing out on yet another move higher for stocks) and, therefore, BND (buy the dip, regardless of its cause).
Mohamed A. El-Erian Bloomberg 8 april 2022
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