With the Fed acting not only as the buyer of last resort but the only big buyer, liquidity is vanishing in the Treasury market, and that’s dangerous. The Fed needs another buyer and US banks are the only significant buyer of Treasuries beside the Fed. They need a steeper yield curve to make money in Treasuries, by borrowing short and lending somewhat longer term.
LOL this has already happened in Japan and the JGB market is crashed liquidity and lower desirability as a financial asset as a result. It appears that the extreme monetary stimulus is irreversible and maybe USA economy will become permanently zombiefied like japan.
The repo market has already suffered a similar fate and the Fed was unable to withdraw the liquidity it pumped into that.
Pretty much the only thing keeping US dollar afloat right now is the fact that it’s global reserve currency. Once countries start divesting then US is gonna crash hard.
Have you heard what happens to countries that start to divest the US dollar?
Difference is that you can’t do the same thing to other nuclear superpowers that you can do to a country like Iraq.
Yanis Varoufakis, Global Minotaur. Oh how the mighty have fallen. The vacuum that sucks up other countries surpluses I’d falling apart before our eyes.
