Larry fink and unsound money

Larry Fink has finally got the message

It was the week that bond markets finally seemed to grasp what central bankers have been warning all year: higher interest rates are here to stay.

From the US to Germany to Japan, yields that were almost unthinkable at the start of 2023 are now within reach. The selloff has been so extreme it’s forced bullish investors to capitulate and Wall Street banks to tear up their forecasts.

Want to cure inflation then do a Volcker:

Volcker raised the rate back to 20% in December and kept it above 16% until May 1981.

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Volcker was terrible IMO. He pushed up rates too high, only to massively drop them in short order, and then repeat the process. He acted like he didn’t have a clue and was simply guessing. How else can one explain taking rates to 18%, dropping them to 8% just two months later, but then taking them back to 19% six months after that. It defies logic.

During the first Volcker recession in 1980, the Fed quickly slashed the fed funds by more than ten percentage points: That rate averaged 18.8% from March 26 to April 20 in 1980 but fell to only 8.6% by early June.

The fed funds rate was quickly increased again to 19.1% when President Reagan took office in January 1981, ensuring a deep recession that began in July 1981 and ended in November 1982. Meanwhile, the fed funds rate was reduced from the 19.1% peak to 8.5% by February 1983. That was the second 10‐​point rate cut from a gentleman now celebrated for never “pivoting” to lower rates when the economy implodes.

As much as I criticize the current Fed for acting too slow, they might go down in history as the best group we have ever had - especially if we have a soft landing.


Complex systems have a logic of their own.

The Captain


So does a lack of logic.