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All-Time Low Junk Bond Yield

Hooray!?

Bloomberg writer Lisa Abramowicz notes "A new all-time low for U.S. junk bond yields, of 4.13%". 

Daniele DiMartino Booth, CEO & Chief Strategist, Quill Intelligence LLC, replied "#Winning" which triggered the key Q&A.

Is the Fed Worried? 

Q: Isn't the Fed "a wee bit nervous over some of the valuation metrics being double the 1929 levels? I’m asking for a friend."

A: "In private, yes."

Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America 

DiMartino Booth is author of Fed Up: An Insider's Take on Why the Federal Reserve is Bad for America.

After correctly predicting the housing crash of 2008 and quitting her high-ranking Wall Street job, Danielle DiMartino Booth was surprised to find herself recruited as an analyst at the Federal Reserve Bank of Dallas, one of the regional centers of our complicated and widely misunderstood Federal Reserve System. She was shocked to discover just how much tunnel vision, arrogance, liberal dogma, and abuse of power drove the core policies of the Fed.  

DiMartino Booth found a cabal of unelected academics who made decisions without the slightest understanding of the real world, just a slavish devo­tion to their theoretical models. Over the next nine years, she and her boss, Richard Fisher, tried to speak up about the dangers of Fed policies such as quanti­tative easing and deeply depressed interest rates. But as she puts it, “In a world rendered unsafe by banks that were too big to fail, we came to understand that the Fed was simply too big to fight.”

There Are No Hawks on the Fed, Only Ostriches

On January 15, I commented There Are No Hawks on the Fed, Only Ostriches

Not to worry, “We’ll let the world know,” when we spot inflation says Powell who cannot see the big pink elephant standing right on the Fed's table.

The Fed cannot see inflation because they do not understand it. 

The immense asset bubbles in the stock market, housing market, and bond market, provide ample evidence of inflation. 

Instead, the Fed and most economists view the CPI, a fatally flawed measure, as representative of inflation.

The result of their head in the sand approach is three consecutive asset bubbles in 20 years, with increasing amplitude.

Janet Yellen is Yellin' For More Free Stuff

Note that Janet Yellen is Yellin' For More Free Stuff

Yellen is a former Fed Chair as well as Biden's nominee for Treasury Secretary. She wants "big" fiscal stimulus. 

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Never before has massive stimulus been needed with financial markets at all time highs

Instead, Covid relief should be targeted in a way that does not reward unemployment or give money to people for nothing.

Yellen's Swiss Cheese Statements on the US Dollar

Yellen also made a series of Swiss Cheese Statements on the US Dollar

Specifically, she said the “value of the U.S. dollar and other currencies should be determined by markets.

I replied "Well La Dee Frickin Da" because it is it is Fed policy and government fiscal policy that sets the tone for the US dollar.

Steps to Weaken a Currency

  1. Cut interest rates
  2. Engage in massive QE balance sheet expansion
  3. Pledge to keep rates low indefinitely
  4. Pledge to ignore inflation and let it run hot to make up for alleged undershooting
  5. Encouraging more fiscal stimulus

The Jerome Powell Fed is five for five on doing the very things that would cause the dollar to sink and Yellen supports all of them.

Meanwhile, bubbles build. That's the inflationary side.  Watch out when the bubbles burst.

Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.

Yellen’s Only Regret 

Please note Yellen’s only regret as Fed chair: Low inflation.

Mainstream media promotes this nonsense and it is taught in schools as part of Keynesian indoctrination. 

Reflections on Global Competitive Currency Debasement

BIS Deflation Study

The BIS did a historical study and found routine deflation was not any problem at all.

“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the study.

It’s asset bubble deflation that is damaging. When asset bubbles burst, debt deflation results.

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

Mish