Something Is Wrong... BOND MARKET IS SELLING OFF! STOCKS SET TO DROP AT THE OPEN. Mannarino
From Greg M
Lions And Friends.
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Please take the time to read this. It is short and to the point. It is regarding the war in Ukraine.
https://www.armstrongeconomics.com/world-news/war/ukraine-cannot-pay-govt-in-2024-without-billions-from-the-west/
Something is "not wrong". In order for any kind of landing to exist, yields must revert back above the FED Funds Rate before the Federal Reserve cuts rates. Without this mechanism, it would send interest rates into a "doom loop". Because yields are inverted, cutting them now means that after the next several meetings, the Federal Reserve will be forced to raise them again, just so that yield curves can finally stabilize above the FED Funds. You can look back at every time the Federal Reserve has cut rates, the Ten Year Yield has crossed above the FED Funds...with the exception of 1966, and this created a "doom loop" of unprecedented rising interest rates, and manufactured surging consumer inflation. The difference between then and now, is that now our GDP cannot sustain the economy by itself. GDP has now become an underdog compared to debt issuance, and this means that if the Federal Reserve cuts rates with inverted yield curves, it would send the economy into a deep Depression. The best scenario that could happen, is that the Ten Year Yield climbs above the FED Funds before the second FOMC this year and they cut rates. If yields do not revert, the smartest option will be to raise rates to force yields to revert. Why is this a smart option? Because it allows some kind of stabilization between the disconnection of reality. We all know the Federal Reserve's end game is to be the lender and buyer of last resort, and if anyone still believes the Federal Reserve has any game left to play, they must give the economy temporary relief from this insanity. Cutting rates with yield curves reverted, would create a severe recession, but it would allow the Federal Reserve to print massive 100X more than 2008.