Thanks Powell – Trustnodes

Facebook is laying off another 10,000 people in the biggest contraction the US tech sector has seen… well ever.

It’s only the latest, with millions of avocado sandwiches now potentially going stale as the boom faces an engineered bust.

The crash the central banks wanted, and demanded, is if not here then well on its way as corporate bond traders have only one word to describe today: carniage.

Credit Suisse bonds have dropped to distress levels as they plunge 20% just today with bank stocks down around 10%.

Government bonds on the other hand have seen an increase in demand as investors flee to ‘safety’ even while the Congressional Budget Office (CBO) warns cuts of 30% across the board are needed if the deficit is to be erased by 2030s.

“The budget would be balanced in 2033 if all noninterest outlays were gradually reduced starting in 2024 so that the reduction reached 29 percent in 2033,” CBO said.

They claim the deficit will reach $2.9 trillion in a decade with $1.5 trillion to cover just the interest on the huge growing mountain of debt.

And all of that is the least of the market’s worry. Instead, just what going from 0 to 5% in a year mean is the question of the day, with no one quite having the answer.

So scrutiny is up a notch as investors circle around to find any weakness. And soon after, all the focus will be on Jerome Powell, the chair of the Federal Reserve Banks.

The Fed board, which is made up of mostly commercial bank executives, is to meet next week and this time they can’t scoff with some glee to say it’s only crypto or it’s only tech, both of which they dislike, as it is their own houses on fire.

“Adjusting for the level of interest rates, the inversion [between 10-year and 2-year U.S. Treasury yields] is unprecedented in post WWII experience: 100 basis points (or 1%) on 4% long bond yields is suggesting something much more serious about financial conditions than 100 basis points (1%) on 15% in 1981. In our view, the Fed will have no choice but to respond with lower interest rates,” said Maximilian Friedrich, an analyst at Ark Ventures.

At other times such rate cut would have sent the market soaring and it may well do so yet, but futures suggest it’s not quite on the card, although there appears to be a general consensus that there will be rate cuts in June.

That June timeline has been suggested for months now, and in the current environment it appears inevitable, giving credence to the criticism that Fed went far too fast and way too high too quickly.

Because the immediate causes of inflation were the supply shortage and the oil shock thanks to our diktata Putin. Both temporary, and neither quite monetary.

Fed however was deaf, as were other central banks like the Bank of England. Instead they moved without care and got bolder as the months went on to explicitly say they wanted a crash.

Well, thanks. What else can we say since no one listened under the cover of central bank ‘independence.’ Independence from the public.

The European Central Bank however did somewhat listen. They did go somewhat slower. So Europe’s economy is in a better shape, but investors today are trying to ascertain their level of exposure to US banks.

And if there’s this turbulence here, one can imagine what might soon go on down lower, in the global south, as well as in China which was already reeling from the property market crash.

For many of them, the above Powell image and message might not quite be a joke because bitcoin is up and it’s the only usable alternative to bank money.

So when they didn’t hear we said we don’t care either because it should benefit crypto, but it would have been far better if they had listened and if they had not breached their mandate twice.

Powell himself is on the record as stating they were targeting higher than 2% inflation in 2021, and then lower than 2% inflation in 2022 and continuing.

He does not set such mandates and he can not alter such mandates unilaterally. His job was and is to target 2%, not higher than neutral or lower than neutral in mind games for children.

Yet what was, was. The question is what is coming and there no one knows fully except that hopefully the current chaos in the market is temporary.

We hold little hope however that a recession is not coming next quarter, so starting now as 10,000 high paying jobs, with that being just a drop in the bucket among countless such announcements, will obviously have an effect.

But we do still hold hopes that unnecessary blunders are avoided. If for example these bankers come out with another hike next week, then it will be time to somehow make them to stop not listening because it would be so very out of touch.

Amid all this though, enjoy spring. Little tends to happen in March, so we might be at worst in the prelude, with there still being time to halt the horses by Fed turning.