The Coming Fiscal Derailment—Why FY 2019 Will Sink The Casino

Since last November 8th the Russell 2000 has risen by 30% and the net Federal debt has expanded by an astounding $1.0 trillion dollars.
In a rational world operating with honest financial markets those two results would not be found in even remotely the same zip code; and especially not in month #102 of a tired economic expansion and at the inception of an epochal pivot by the Fed to QT (quantitative tightening) on a scale never before imagined.
And we do mean exactly those words. By next April the Fed will be shrinking its balance sheet at $360 billion annual rate and by $600 billion per year as of next October.
Altogether, the Fed’s balance is scheduled to contract by upwards $2 trillion by the end of 2020. And it’s apparently on a path that is so locked-in—-barring a recession—that Janet Yellen affirmed in her swan song that the Fed’s giant bond dumping program (euphemistically called “portfolio runoff”) would no longer even be mentioned in its post-meeting statements.

This post was published at David Stockmans Contra Corner on Tuesday, December 19th, 2017.

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