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05-01-2019, 03:48 PM
Interesting views by Ray Dalio and perhaps a timely reminder.
https://www.linkedin.com/pulse/help-put-...card_title
Takeaway Point A : "[color=rgba(0, 0, 0, 0.75)]In both the 1930s case and our most recent case, that led to a short-term debt cycle rebound, which eventually led to a tightening (in 1937 and over the last couple of years) for the reasons I previously described in explaining the short-term debt cycle. This time around, the tightening is coming via both interest rate increases and the Federal Reserve reducing its holdings of the debt it had acquired."[/color]
Takeaway Point B : "[color=rgba(0, 0, 0, 0.75)]We call the power of central banks to stimulate money and credit growth in these ways “the amount of fuel in the tank.” Right now, the world’s major central banks have the least fuel in their tanks since the late 1930s so are now in the later stages of the long-term debt cycle."[/color]
Surmising, as current tightening (Point A) causes a decline in asset prices, and with the inability of central banks to stimulate credit growth to mitigate a decline in asset prices (Point B), we are in a delicate market, where an economic / financial catalyst (e.g. default by riskiest debtors, setting in of inflation), would trigger fear --> capitulation of financial markets --> downsize of economy's spending -->many years decline in corporate earnings.
https://www.linkedin.com/pulse/help-put-...card_title
Takeaway Point A : "[color=rgba(0, 0, 0, 0.75)]In both the 1930s case and our most recent case, that led to a short-term debt cycle rebound, which eventually led to a tightening (in 1937 and over the last couple of years) for the reasons I previously described in explaining the short-term debt cycle. This time around, the tightening is coming via both interest rate increases and the Federal Reserve reducing its holdings of the debt it had acquired."[/color]
Takeaway Point B : "[color=rgba(0, 0, 0, 0.75)]We call the power of central banks to stimulate money and credit growth in these ways “the amount of fuel in the tank.” Right now, the world’s major central banks have the least fuel in their tanks since the late 1930s so are now in the later stages of the long-term debt cycle."[/color]
Surmising, as current tightening (Point A) causes a decline in asset prices, and with the inability of central banks to stimulate credit growth to mitigate a decline in asset prices (Point B), we are in a delicate market, where an economic / financial catalyst (e.g. default by riskiest debtors, setting in of inflation), would trigger fear --> capitulation of financial markets --> downsize of economy's spending -->many years decline in corporate earnings.