With continued money printing on the horizon, this is the situation with asset bubbles.
October 19 (King World News) – Peter Boockvar: I need to comment on a few Fed stories over the past few days. One was generated from Fed Governor Randy Quarles who said last week:
“It may be that there is a simple macro fact that the Treasury market being so much larger than it was even a few years ago, much larger than it was a decade ago and now really much larger than it was even a few years ago, that the sheer volume there may have outpaced the ability of the private market infrastructure to support stress of any sort there.”
He then took this as a basis that the Fed will need to be a permanent fixture “as a way of supporting a functioning market in Treasuries.” But, I haven’t concluded that that’s the case, the institution certainly hasn’t concluded that that’s the case, but I do think it’s an open question.”
This is the thought process of someone who doesn’t understand markets. For those that do understand know that there will always be buyers and sellers in a particular security and NO WHERE MORE SO than the US Treasury market and the only question is at what price, not an issue of market functioning…
Billionaire Eric Sprott Buying
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There will ALWAYS be plenty of buyers of US Treasuries but at what level is the question. The Fed just doesn’t like what that level will be because it would imply higher longer term interest rates. If there is any temporary price dislocation, the free market will ALWAYS quickly fix that.
The other story was over the weekend in the Financial times that said:
“Senior Federal Reserve officials are calling for tougher financial regulation to prevent the US central bank’s low interest rate policies from giving rise to excessive risk taking and asset bubbles in the markets. The push reflects concerns that the Fed’s ultra-loose monetary policy for struggling families and businesses risks becoming a double-edge sword, encouraging behavior detrimental to economic recovery and creating pressure for additional bailouts.”
This is like giving someone crystal meth and then trying to deal with the effects by giving out Xanax afterwards. The answer to preventing asset price bubbles is just to stop giving out the crystal meth.
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Greyerz – The Terrifying Endgame Is Rapidly Approaching
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