Loading ...QUESTION: Marty; You warned that there would begin a cash shortage and real rates would rise in the private sector starting in September after Labor Day. Ok, it’s about 15 days past that marker and Repo rates have gone completely nuts hitting 10% forcing the Fed to intervene. They were calling it Armstrong’s revenge here in the dealing room. It certainly appears the Fed has lost control of short-term rates as you warned. Is this the start of the chaos you have warned about?
GD
ANSWER: It’s not my revenge, it’s fiscal mismanagement. Look, this is the chaos we have coming and sorry, it is the beginning, not the end. It’s not even a fluke or a blip. So get used to it. Indeed, the Fed has lost control of short-term rates. Trump can jawbone all he wants for zero to negative rates. Sorry! The free markets are showing something else lies in wait.
The Repo Rate reached a high of 10% by about 9 am just before the stock market opened. The fed funds rate was testing the Fed’s upper limit. The Fed was forced to intervene I believe for the first time since the 2008 crisis.