LIVE! Is The US Treasury Market About To Go NO BID!? It Is Possible... IMPORTANT UPDATES. Mannarino
From Greg M
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The Federal Reserve has already put us into the "moment of maximum saturation". This is because no matter what the Federal Reserve does over the next several FOMC's, any decision will place the economy and their monetary policy into the same situation that occurred between 1966 - 1981, and in my opinion they did this on purpose.
When the Federal Reserve cut rates in 1966, the Ten Year Yield was below the FED Funds Rate. This became a game of "catching up", as they were waiting for the Ten Year Yield to finally surpass the FED Funds Rate level. The result of this was extended periods of rate hikes, extended periods of rising bond yields, and because of this it fueled consumer inflation, as the Federal Reserve kept the money printers on to keep the markets propped up.
The key difference between then and now, is that back then the economy could afford to stagnate because real GDP was still higher than national debt. If this same scenario occurs, then it would place the real economy into a Depression as GDP falls off a cliff. There is a possibility that this time the Federal Reserve might not keep the money printers turned on, if you look at the Debt/GDP ratio, because if they do, then consumer inflation will skyrocket too much that they won't be able to get the 10YY back over the FED Funds Rate...and this will create a death spiral.
The best case scenario for the markets is something similar to what happened between 1966 - 1981. If you look at either the Dow Jones Industrial Average or the S&P 500, the markets hit new highs, before hitting new lows, and consolidated in this range for over a decade. In my opinion, this time the market will move only back up to the all time high, before moving to a new low...this is my "best case scenario" for equity's. But there is a larger probability that this time, the markets won't even go back to the all time high, because of what I explained above.
The FED Funds Rate, 10YY, and DXY all act as a buffer zone for precious metals. The situation between 1966 - 1981 seems to be inevitable, and prior to 1966, Gold was practically flat under $43 before exploding upwards to $872. Imagine looking at the chart of Gold today as being practically flat, and then compare it to back then when it was skyrocketing.
The "moment of maximum saturation" is here because this time no matter what the Federal Reserve does in this current situation, inflation will destroy their ability to print more money...and we could either see the 10YY chase the FED Funds Rate for decades or the 10YY could finally exceed the FED Funds Rate, and when the Federal Reserve does cut rates, the 10YY will keep moving higher ending it all. By the time this occurs, the economy will already be in a severe Depression. There were "less than mild" recessions between 1966 - 1981, as people were actually working.
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