Faith is stepping out into the unknown with nothing to guide us but a hand just beyond our grasp.
The Fed is in a checkmate position. Choice 1) Raise rates and stop inflation…but widen the yield pickup of money market funds over deposits. More ‘carry trades’ come undone. The US. banking system is a carry trade - the largest. All banks ‘borrow short, and lend long’ and are in duration mismatch by design. An inverted curve punishes carry trades. Choice 2) Lower rates and reflate the banks balance sheet. But inflation stays well above target rate. Consumers are steadily shifting from low-yield bank savings to high rate SIPC insured brokerage. Inflation creates the incentive to move, recent headlines creates the awareness and urgency to move. Anybody have a dashboard to track these flows? (St. Louis FRED site should have the all the data)
I remember when I started this my biggest hope was that someone would connect with my art and now we’re here, still doesn’t feel real, gonna celebrate by making more art.