US macro risks discussed:
1) US debt ceiling showdown looming, and Republicans have no incentive to extend the debt ceiling with bad blood from losing Congress + midterms coming next year. Govt shutdown possible.
2) Treasury General Account dwindling, implying need for more Treasury issuance if stimulus is to be continued. Bad news if debt ceiling not raised.
3) Fed will have to reconsider stimulus policy if debt ceiling not raised. Without doubled-barreled approach together with Treasury's help, Fed will be reduced to just single-barelled 2009-2014 monetary policy. Yellen had to walk back on tightening several times as Fed Chair at the time, implying taper schedule might yet be delayed.
4) Draft written by Bernanke in 2013 allows Treasury to strategically default on debts held only by the Fed, i.e. monetizing debt. Next big no-no in monetary policy after helicopter money.
5) Excess savings declining as stimulus check party dwindles, implies economic slowdown on the horizon.
6) Fed board up for rotation soon, with doves exiting and several hawkish mutineers as possible candidates. Yellen had to break precedent as Treasury Sec to publicly announce her firm support for Powell's renomination.
7) Static RRP levels as a result of $1T of daily “leakage” could be perceived by markets as tightening.
8) Inflation! Stagflation! Armageddon!
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