A Wave of Junk Debt Could Force the Fed to Pivot
Danielle DiMartino Booth: A Wave of Junk Debt Could Force the Fed to Pivot
Palisades Gold Radio: 11-19-2022
Danielle discusses the amount of work that goes into every press release the Fed puts out. They have a hypersensitivity to how and what they place in these releases.
Powell has a largely thankless job, and the question is are they relying on lagging information. Danielle recently nicknamed Jerome Powell "make my day Jay" when he was told the markets were up during a press conference.
We're seeing larger moves in housing than was expected. Home prices are falling in half of the U.S. while some regions see prices still increasing as some people see it as an opportunity. Amazon needs to match consumer demand, and we see them laying off people as demand declines.
We're now seeing surplus inventory in the supply chains that no one is buying. Powell's pain point will come when something critical breaks in the credit markets. A yield curve inversion signalled that credit would be tightening.
However, now the way to interpret it is in terms of banks extending credit. If banks can't see profit in lending, they won't lend, and then the economy will slow.
Lastly, Danielle discusses the recent FTX crypto exchange collapse and the concept of Central Bank Digital Currencies. Tom notes that the Ontario Teachers Pension had 90+ million invested in FTX. This is not the place you expect to find your pension plan investing diligently.
Time Stamp References:
0:00 - Introduction
0:38 - Fed & Press Releases
2:28 - Powell Nickname
5:13 - Carvana & Auto Sales
7:59 - Housing & CPI Metrics
13:22 - Wage Price Spiral
19:07 - CPI & PPI Numbers
23:05 - Fed Politics & Recessions
27:40 - Powell & Credit Markets
33:20 - Fed Data & Actions
35:33 - U.S. & U.K. Pension Systems
38:12 - Crypto & Regulators
40:05 - CBDCs & Governments
44:55 - Wrap Up
Talking Points From This Episode - The Fed's micromanaging approach to press releases. - The Recent Fed press statement and Jerome's responding aggressively to being told markets we're up. - The housing markets and excess supply in goods that no one is buying. - The problems with pensions and the crypto markets.