U.S. TREASURY YIELDS PRIMED TO CASCADE INTO NEGATIVE TERRITORY

Headline:
Real Fed Policy Objective = Sustained Asset Price Maximization.
Easy Money” = The Only Pathway.
Obsolete Inflation Obsession = Farcical Rationale For “Easy Money.”

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One Of The Most Paradoxical Concepts…With Respect To S&P 500 Equity Prices = There Is No Consistent + Meaningful Correlation To Domestic GDP Growth.

And In An Era Of Global Markets…It Indeed Makes Some Sense…As Companies Can Sell Their Goods And Services Just About Anywhere On The Planet.

So…While Domestic Demand Certainly Matters To ALL U.S. Businesses…It Matters Much Less To U.S. Multi-Nationals…That Can Augment Domestic Market Dynamics With International Opportunities.

Combined With Acute Skill At Reducing Equity Share Count + Cross Border Tax Minimization Strategies It Has NEVER Been Easier For Multi-Nationals To Grow Earnings + EBITDA Per/Share Far In Excess Of Muted Revenue Growth.

And If That Does Not Work…Just Re-Define Financial Statement Metrics i.e. Non-GAAP vs. GAAP.

And If That Does Not Work…Just Purchase Your Customers While Burning Investor Cash i.e. NFLX…Despite Little Hope Of Future Profitability.

And If That Does Not Work…Just Make A Dramatic + Large + Pricey Acquisition Or Divest/Sell An Under-Performing Division¬† To A Well Funded Private Equity Giant.

No Matter…Investors Will Throw Money At Almost Any Business With A Pulse…Adhering To The “Soft” Instructions Of The World’s Central Bankers…As Stratospheric Asset Prices = Primary Directive…Fueled By The Easiest Money In Global History.

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Nevertheless…There Is Still An Obsession With Domestic Economic Growth…As It Primarily Drives Organic Interest Rate Policy…Which Meaningfully Impacts Equity Valuations…And Lower Interest Rates Generally Push Up Valuations For Riskier Asset [Equities + Real Estate] And Vice-Versa.

Currently…It Appears U.S. Interest Rates Are Heading Far Lower…As The Capital Markets Now Instruct Fed Policy Makers…Seeking To Catch Down To Negative Rates In Both Europe + Japan…Hoping To Finally Stimulate Legacy Based Inflation…Despite A Decade Of Miserable Under-Shoots.

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The Only Real Question Remaining…

How Low Can Interest Rates Really Go In The United States?

The Mathematical Answer = There Is No Downward Limit.

But It Seems That Even The Globe’s Most Dovish Central Bankers [i.e. Kuroda + Draghi] Believe That Negative Interest Rates At/About…50 Basis Points …Present As Some Psychological Limit …That The Masses Just Cannot Accept Anything Less…Even Though Those Same Masses Are Already Being “Tarred + Feathered + Shamed” As Irrational Savers.

So…Rather Than Lowering Rates Deeper Into Negative Territory When Below The Zero Bound…Draghi And Kuroda Ditch Their Interest Rate Playbooks And Pivot Toward Quantitative Easing…Further Diluting Their Currencies…Primarily To Stimulate European + Japanese Export Competitiveness.

These Policies…In Far Away Lands…Do Impact The U.S. Economy…As 2019 Money Instantaneously Moves Around The Globe In Search Of Yield…And Donny T. Knows It.

In Particular…U.S. Treasury Yields Offer A Beacon Of Positive Yield In A World Where $12T+ Of Sovereign Debt Yields Negative.

Of Course The U.S. Dollar Holds Firm In The Face Of Euro + Yen Diluting Policies…Which Seems To Really Piss-Off Donny T…Even Though QE + ZIRP Were Promoted…And Liberally Executed…By U.S. Central Bankers Too.

Still…With The World Drowning In Excess Money…Desperate For Positive Yield …There Is No Sustained Inflationary Impulse.

What To Do?

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Maybe It’s Time For Powell And His Paralyzed FOMC Compatriots To Change Their Tactics…Stop Ruminating About Muddled U.S.¬† Economic Data + Aggressively Act.

They May Attempt To Decisively Stoke Inflation As A Clever Diversion While Covertly Promoting Their Primary Objective…Igniting + Increasing Asset Prices Ever Higher.

How About They Shock Us All And Strap On A Huge Sack?

As In…Immediately + Steeply Going Negative On Interest Rates …Boldly Skipping Past The QE Playbook At Zero.

How Far Negative?

Might As Well Start At -5.00%…A Good Round Number.

The Consequences = Draghi + Kuroda Currency Depressing Policies Are Immediately Neutered + The U.S. Dollar Gets Slaughtered…Appeasing Quasi Fed Chair Donny T.

Further…Stocks + Real Estate [the real inflation recipients] Go “Full On” Parabolic As Unemployment Tumbles Further Toward 0%…Ensuring A Trump 2020 Presidential Victory.

Investors Then Begin Paying The U.S. Treasury To Hold Their Money And Suddenly…Soaring U.S. Sovereign Debt Becomes An Enormous Source Of Positive Cash Flow…Eroding Massive Fiscal Deficits…America Would Be So Great…AGAIN.

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But What If This Tactic Backfires + Does Not Produce The Idealistic Results Postulated Above?

At Least Powell Might Finally Realize That Lower Interest Rates Are An Impotent Antidote To Legacy Based Inflation Measures + That The Archaic 1977 Congressional Mandate He Frequently Cites…Authored During A Period Of Hyper-Inflation…Is Now A Meaningless Legislative + Political Relic.

Contact The Author: Dominate@GlobalSlant.com