11/21/2022 - Yra Harris – Recapping the Last Two Weeks

“As I have warned, the world needs to be cognizant of the fallout from the Swiss National Bank pulling the PEG on the EUR/CHF back in January 2015, which wreaked havoc on Eastern European citizens with massive Swiss franc liabilities because of the FED and ultra-low interest rates. Since global central banks have been flooding the financial system with liquidity, we are in a new era that cannot be modeled. So it’s interesting that the talk continues of inflation waning but rates still react more to FED jawboning. The US 2/10 yield curve closed at its most inverted level in 40 years, even as the DOLLAR has corrected about 5% from its recent highs.
This is something to watch as the FED continues talking asset prices lower, especially the EQUITY markets. Yet stocks continue to defy Bullard/Kashkari. IF I RAN THE FED, RATE HIKES WOULD STOP AT 4% WHILE DOUBLING THE SIZE OF QT (removing $180 billion a month). The POWELL FED is on the verge of making the same mistake it made in 2018 with what Stanley Druckenmiller called the double-shotgun approach. The inverted curves are telling you Jerome: It’s time to rein in excess liquidity in an effort to bring prices down to the level of fed funds. Market signals are a valuable tool if the policy makers would heed them.”

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