via @OccupyWisdom :
Post 2008 risk for all monetary minded people
A) we are in a 10-yr depression, although it’s been called an expansion
After the recession technically ended in summer 2009, we’ve averaged 2% “growth” for 10 years. This is 1% below trend growth of 3%.
Long term below trend
growth is the definition of Depression. Depressed growth. It’s not negative growth.
B) Due to the -1% less growth, the US economy has lost about $5,000,000,000,000 in potential wealth.
C) On top of this, the problems of 2008 weren’t solved.
Fed couldn’t normalize rates
Fed couldn’t normalize balance sheet (still almost 5x larger)
System is larger, more derivatives, more debt, higher debt ratios.
D) studying @JamesGRickards methods of financial analysis
Complexity theory says the greatest risk is an exponential function of scale.
If you double the system, the risk doesn’t double but may increase 10x.
So the system is more risky, the debt is higher, the derivatives are larger. In another crisis what can the Fed do?
E) the balance sheet is $3.8T, how far can they expand it without currency risk?
Interest rates are only 2.5%, they need 4-5% to cut to help economy out of a recession.
Because dates weren’t raised until 2015 (should have been raised in 2010) now the Fed attempted to normalize into a weakening economy already in depressed long term growth
to 2.5%, and reducing balance sheet to 3.8T from 4.5T the wheels began to fall off in December 2018, rapidly.
F) Now they’ve paused – so will they ease or tighten assuming the economy shows signs of strength?