Money & Markets - Everything's a Bubble: Dallas Chief Kaplan Admits Fed Is Inflating Assets

Article by JT Crowe in Money & Markets

Everything is a bubble and the worst-kept secret in the finance sector has been officially confirmed: The U.S. Federal Reserve is inflating said bubbles via more quantitative easing on the repo market.

The hard part is determining when said bubbles will blow up in all our faces and the greatest recession in history crushes the U.S. because the Fed, which lowered its benchmark interest rate three times in 2019 while the economy was strong (the opposite of sound monetary policy), is out of bullets.

Dallas Federal Reserve Chief Robert Kaplan admitted everything in a recent interview with Bloomberg. “All three of those actions are contributing to elevated risk-asset valuations,” Kaplan said during an interview on Bloomberg Television.

There it is, folks; the cat’s out of the bag. Of course, Kaplan’s cohorts at the Fed disagree — at least in public.

Fed Chair Jerome Powell says flooding the repo market with freshly printed dollars starting in September is “not QE.”

Money and Markets contributor Bill Bonner discussed the repo market massacre and what led to this “not QE” in a column here Thursday:

It’s “Inflate or Die.” There’s no other way. And if there was ever any doubt about it, it was resolved on September 17, 2019.

That’s when liquidity dried up in the “repo” markets — an important corner of the lending markets. The rate to borrow overnight spiked to 10%, and the Fed came to the rescue. It’s been pumping billions of dollars into the repo market ever since.

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