Wednesday, January 20, 2021

The Fed, US Treasury and Return to Normal

The Fed
Those that view the message of the market on daily basis are likely confused by trading noise. While trading noise contributes to the long-term trends, it does not define them. Human behavior tries to explain trading noise as a meaningful trend. This confuses the majority which, in turn, contributes to their role as bagholders of trend transitions.

The consequences of the Fed's actions, revealed by trends of price, leverage, and time, are defined and discussed in The Matrix for subscribers.

Subscriber Comments

Janet Yellen, Biden’s Treasury secretary pick, tells lawmakers to ignore national debt and ‘act big’ to avert a protracted economic downturn. The Fed's is already acting big. The Fed used to stimulate the economy through purchase of short-term corporate paper.

The Fed's stimulation efforts changed to buying government debt after WWII. After 2003, that model changed as the Fed slowly switched to buying distressed and worthless assets outside of US Treasury debt. That trend continues today.

Meanwhile, millions of jobs in the working class have been permanently destroyed by the lockdowns. The Fed might be able to provide liquidity in the debt markets, but it can't do much to reclaim lost jobs. If stimulus created jobs, the US would have dug itself out of the debt hole after cash for clunkers, plus numerous other failed stimulus programs.

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