Source: Daily Reckoning
“There is growing consensus that the makings of a financial crisis of some sort is building – and could drop sooner rather than later…the belief is that something is wrong….Even though the Fed has been able to avoid another financial crisis the last decade, with quantitative easing (QE) policy – or what I call dark money – their ‘toolkit’ might not render us ‘safe enough.’ You see, the Fed manufacturers dark money that the markets have come to rely on. Through quantitative easing (QE) the central bank has accumulated a balance sheet that hit a high of $4.5 trillion of assets last year. By having purchased these assets with electronically created money, the Fed was able to keep rates at the middle and longer end of the yield curve low….The Fed knows it is currently in a catch-22….Here’s something else you might not know: Two weeks ago, it even quietly increased its book of assets. That’s the opposite of the policy of unwinding, or selling its assets through quantitative tightening (QT), which is what Chairman Powell promised he would be doing. That’s another sign that the Fed is afraid of a possible new financial crisis. For more proof, consider that former Fed Chair, Janet Yellen, just did a 180 on her prior comments related to the possibility of another crisis….Companies are holding $9.1 trillion of debt now in contrast to the $4.9 trillion in 2007 before the last financial crisis. The financial system is more highly levered than they were prior to the last financial crisis.”
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