Black Swan - The End of a Force-Fed Credit Cycle
Updated
Idea for US10Y, Credit Cycle, and Equities:
The Bottom Line:
- There is no monetary inflation, because the money created does not enter the economy... however there is credit inflation because credit is created with that money as collateral.
- There is PRICE inflation, ASSET inflation, CREDIT inflation, NO monetary inflation, oil deflation.
- When credit can no longer inflate, credit inflators will begin to sell assets so that they can redeem their asset appreciation for money to redeem for the debt they have lent or borrowed.
Where is the money that was injected into the economy? Where did it come from? Who loses here?
YOU!
The money created from high salaries caused by the speculative asset bubble, and the middle class who invest their hard-earned dollars into the asset bubble, creating more jobs and easy money, which is in turn invested back into the bubble for effortless paper wealth... The inflated prices you pay for food, education, housing, health care... When credit inflators decide to redeem their asset appreciation. It all returns to ashes.
- During the collapse of a credit bubble, governments will sell off bonds in a frenzy, because there is too much supply.
GLHF
- DPT
Allies — the strongest and truest in the world: underlying conditions - Jesse Livermore
The Bottom Line:
- There is no monetary inflation, because the money created does not enter the economy... however there is credit inflation because credit is created with that money as collateral.
- There is PRICE inflation, ASSET inflation, CREDIT inflation, NO monetary inflation, oil deflation.
- When credit can no longer inflate, credit inflators will begin to sell assets so that they can redeem their asset appreciation for money to redeem for the debt they have lent or borrowed.
Where is the money that was injected into the economy? Where did it come from? Who loses here?
YOU!
The money created from high salaries caused by the speculative asset bubble, and the middle class who invest their hard-earned dollars into the asset bubble, creating more jobs and easy money, which is in turn invested back into the bubble for effortless paper wealth... The inflated prices you pay for food, education, housing, health care... When credit inflators decide to redeem their asset appreciation. It all returns to ashes.
- During the collapse of a credit bubble, governments will sell off bonds in a frenzy, because there is too much supply.
GLHF
- DPT
Allies — the strongest and truest in the world: underlying conditions - Jesse Livermore
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Interesting stat: since 1985, 10Y yields have never been below 4% with a 3% Core CPI y/y%Trade active
The situation that may occur is this:A deflationary shock may come first, as equities are sold off in favor of bonds in panic.
Yields are on a relentless downtrend:
Why is this?
There is economic deflation, but inflation in prices, assets, and credit.
Fed are trying to inflate the economic deflation away, but the cost is steep for price inflation.
Yields may indeed explode upward once we enter a stagflation scenario.
In either case, the long Vol trade will pay off.
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How ironic it would it be if the exact opposite of what people were scared of and what the bulls wanted to happen was the catalyst: Trade active
yields collapsing, soon to capitulate. I was correct in this assessment: Trade active
Now they let the masses know about credit cycle: reuters.com/breakingviews/chancellor-us-credit-cycle-close-overheating-2021-07-30/
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