Is The Fed Spending All This Money To Inflate The Wrong Thing?

JJ Burns and Joe Weisenthal spoke to CNBC this morning about the recent Chinese rate hike and the thinking behind the Fed’s current asset inflation strategy.

  • 0:25 Risk is coming off the table, and China knows they have an inflation problem. China is also aware more hot money will be coming in through quantitative easing II.
  • 2:05 This is an olive branch that China is throwing out there, but, in the end, China is going to be the hot money area. This might tighten real world currencies and the yuan. The reality is the Fed is in the driving seat. The real concern is this asset inflation from the Fed; they’re much better at producing bubbles.
  • 3:30 Bonds are going to head lower, the 10-year might get to 2%. We’re embarking on more missteps, the Fed wants investors to go into equities or other hard assets, but that could blow up in the face of investors.
  • 4:35 The curve could potentially flatten a bit more, but it may not matter where interest rates go anymore. Mortgages and car loans are at lows. People are not going to buy anymore real estate or do any more financing.
  • 6:45 Household debt needs to be restructured, we’re only, at best, 40% through that process. Right now, the Fed is trying to raise asset values in an effort make individuals more comfortable with their debt levels.


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