Central Bankers All-Talk, No-Walk

[errolanderson]

The Bank of Canada has lots of talk, but no bite. After all the hoopla, BOC key lending rate announced holding steady @ 0.25% this morning.

The U.S. Fed did the same at noon today . . . all bark, no bite. Rates holding steady. Of course, these bankers say rates are going up sometime soon . . . In reality, the recent stock market fallout has likely scared the heck of these bankers. Rate hikes could be fatal to equities and asset values.

This ongoing rate freeze could trigger a near-term bounce in stock markets, then what, next leg down?

[blackpowder]

I'll admit, I termed some debt this time.

[helmsdale]

I'll admit, I termed some debt this time.

I'm undecided...

I see only two ways out of this. (1) They normalize and bring about monumental economic pain on a scale that I dont think weve ever seen before, or (2) they continue to kick the can.

Our collective pain adverse nature has made (2) both desirable and expedient the last 20 some years. There is absolutely ZERO buy in for normalization, and every desire for MORE free money! This only ends when the current path brings about immense enough suffering to think that global economic collapse is thought to be more desirable in the short term... that's a ways off yet.

[blackpowder]

I just felt that the threatened 1.25 rise over a year was worth covering.

[errolanderson]

Central bankers are deer-in-the-headlights right now . . . .

If February turns turns out to be a disaster for stock markets, they'll be talking about rate cuts. There is so much debt out there that can turn real bad, real fast.

[TechAnalyst]

I disagree.

I listened intently to the FOMC press conference and it was very different than in the past.

Powell was painfully clear how much more important and damaging inflation was than short term asset values. He reiterated on a number of occasions that the economy (stock market) was different this time and it could withstand the suggested rate hikes.

Most importantly, he clearly avoiding giving any mention to the recent weakness in the stock market or what they might do if assets are impacted by higher rates.

Out of this, I would expect treasuries to continue weakening resulting in higher rates and stocks could be in for a larger correction.

We shall see...

[errolanderson]

Stock market appears now plunging into chaos.

Powell was uncertain and not very clear with schedule of rate hikes. And investors hate uncertainty . . . .

[TechAnalyst]

Or as I was suggesting, investors don't like being told that there will be no Fed put this time. Inflation is more important.

[errolanderson]

Or as I was suggesting, investors don't like being told that there will be no Fed put this
time. Inflation is more important.

On a stock market sharp correction / crash, inflation may be the least of Powell’s concern. Asset deflation will hit hard if this equity / crypto selloff continues. Commodities also at-risk.

Credit market risk gauge has surged since Powell’s speech this aft . . . .

[Austrian Economics]

Central banks cannot just hold rates at barely above zero forever. As the burden of debt continues to rise exponentially, as it must with fiat currencies, business demand for capital will falter if rates do not resume their downward trend into negative territory.

If the BOC attempted to raise rates, they would not get above 1/2% before an avalanche of defaults would threaten to bury the banking sector.