Comments on: U.S. stocks may soar higher – only to crash-land Mon, 26 Sep 2016 03:26:00 +0000 hourly 1 By: Mon, 25 Mar 2013 15:02:33 +0000 Thanks for this. A good (circular) assessment…

Interested to hear and see a similar your assessment on the Fed exit options i.e., to unwind the balance sheet of the Fed and pull in Money Supply.

Would the argument be that at some turning point – 6.7% UE, LTI of 2.5% and rising “real wealth” asset prices – bonds and MBS will normalize in price (i.e., yields will rise)? And that the normalization of yields would not be seen as detrimental to US economic B/S because of the impact lower relative currency position (vs. 2008) will have on corporate profits?

This would seem to make sense of the Feds position i.e., that Bernanke then can unwind or sell back MBS or sit on the expiring bonds acquired – provided the world does not have a “shock” event (i.e., major war, loss of faith in US credit, or trade / currency wars or regional economic collapse or basic resource shortage) emerge. True?

Or is it that we are missing something here… namely that the NAM and EUR flat lines under austerity (i.e., corporate cost cutting can go no further) – resulting in stubbornly high unemployment, capital / human flight to high risk / emerging assets and/or capital being returned to its owners? Thus perhaps stimulating a re-emergence of inflation – led by the emerging economies who perhaps may stimulate a wealth effect for their households through political means), which in turns lifts yields/the price of risk in the developed economies thus stifling credit and growth further = stagflation?