El-Erian: The Fed has a difficult situation it may lose control of the bond market
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- čas přidán 25. 06. 2024
- #Mohamed El-Erian #FederalReserve #Bondmarket
Mohamed El-Erian, president of Queens' college at Cambridge University and Allianz chief economic advisor, joins Yahoo Finance to discuss the latest Fed decisions, impacts from bond market moves, and inequality due to the pandemic.
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A lot of people don't understand this fact ma'am.
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Can the real Constitution be restored? Probably not. Too many Americans depend on government money under programs the Constitution doesn't authorize, and money talks with an eloquence Shakespeare could only envy. Ignorant people don't understand The Federalist Papers, but they understand government checks with their names on them.
@@samuelteddy.439 true talk. "Anyone who is not investing now is missing a tremendous opportunity."
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proper research, good analysis is what you need to make profit in this constant market.
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I got a bad feeling about this debt market and the coming crash
Stop your exaggeration! There r lazy people everywhere
It may land like a mother ship UFO on your front lawn. You may shake like a sopping-wet, scared rat. It will be very unnerving and scary...like a giant Halloween ghost, or pumpkin or vampire bat.
I'm not sure this economy can handle a rise in interest rates
debt just like anything can be inverted
Deflation not inflation.
Mohamed El-Erian...."my man", dropping knowledge to the masses.
The economy is about production and supply not aggregate demand. You really can't grow an economy by using debt to increase Aggregate demand. Aggregate demand is easy to increase. It can happen overnight. Just print some money. Aggregate supply takes time to increase. The situation will be stagflation not a growing economy.
Peter de Luca: Economist
I like how nobody ever points out that we have around 1 million new unemployment claims a week for a year now. It’s insanity.
I like it too 😊🇮🇹❤️🇺🇲 bless you
What’s more insane is all the talk of inflation. So many unemployed, falling m2v, technology, aging demographic. Systemic inflation is a long way off yet. Any bump now is just supply issue from Covid, that’ll change.
That's o.k. they will just print money and send out the checks in perpetuity....the "new normal"...
Forget a 30% increase in income!!!
To the OP - Is it 1 million cumulative per week or constant? 52 million unemployed? I don't think so. 10 million total, probably, in hospitality, tourism, and restaurants, which is reasonable. They're back May 1st thru July 4th. Disneyland opens April 30th.
The market place is saying that inflation is transitory, therefore atm it is in line with the FED. If one looks at the term-structure of break even, you can see that the 10-Yr BEIR is lower than the 5-Year etc (i.e. an inverted curve). This is not usually the case, whereby the curve is typically upward sloping.
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He just openly said economic activity will be determined by fiscal stimulus. Do we really lack the spine as a culture to weather through a downturn without placing future generations of Americans in debt? I think so. It will all fall apart because we lack the resolve to face our problems. It will be worse than facing the music now.
I agree. The currency will fail at some point. It might not be for awhile but it’s a mathematical certainty with the debt levels.
Of course we do, because politicians have short term goals/views, generally.
Couldn't agree more.
Trump and the repubs already spent wildly except their deficit spending only enriched the top 1%. We were already 20-something trillion dollars in debt. Which in and of itself is NOT as bad as it sounds, according to Paul Krugman.
People/culture are weak
This guy's been getting it wrong for as long as i can remember.. he went on TV no less than 10 times in mid 2020 repeatedly telling everyone not to buy equities, right at the beginning of a 40% bull run. Now he says that even if the Fed loses control and yields spike, the economy will be unaffected. Fat hope. Yield spike could lead to panic, contagion and credit crunch. Trillions of bonds underwater. Good luck El.. you're gonna need it!
He was saying buy companies with good balance sheet, stop with false narrative !
What if a giant Halloween UFO bat flew out the sky and scared the bejeebus out of the stock market and bonds? Hmm?
The Fed cannot stimulate lending with rates this low and inflation this high. That’s the problem
Exactly. If people aren't able to repay the debts that have been deferred as a result of the pandemic, then we're in real danger of a credit crunch which would result in a liquidity trap
The FED creates the problem. Systemic debt.
The last decade, corporations and consumers have taken on so much debt, because of ZIRP, very few credit worthy companies & individuals are left to lend to!
Wouldn't one borrow more at low rates when inflation is high? It's like free nominal money.
El-Erian is the most honest out there. I like him.
When financial channels start turning every conversation back to "inequality" and "fairness" you know they've jumped the shark.
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As investors wise up and stop buying bonds the fed will have its hands full.
you can't box with god... we'll all pay for it with hyperinflation
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If the Fed announces it will be buying more bonds, that would likely bring down interest rates.
Not for long
Already did
Where does it get the money to buy bonds?
@jay print currency, I found this joke on internet question what is difference between 1 and 1 trillion. Fed chairmen answer: 10 strokes of “0” key on laptop
@@jaym9846 The Fed can create the money, and buy as many bonds as they want. They call it quantitative easing.
So...... bitcoin?
No
How would you invest your stimulus check? First I pay the rent then i buy some food, then I pay down some debt.
Thanks......for wat-ching.....
Humble Expert provides pointers on How he/she thinks. Thanks Mohmmad.
Printing money does not promote equality !
Wish they presenters would unpack "the Fed may lose control over the bond market" comment by Mo
It's not the Fed's job to reduce income inequality. Only the government can do that. And it has to be done with great caution because it could incite the most intelligent and productive people to work less or retire earlier.
They have always managed to increase income inequality, or at least asset wealth inequality. Nor can the government reduce income inequality. That's just communism and excuses for complete state control. Feudalism is here again and that's the plan.
It already has! We quit!😊
What is income inequality? If you are smart and work hard you will make more than dumb lazy people!
Why do you want to reduce income inequality ? Do you want your brain surgeon paid a roofers wage ? Higher skills demand higher wages. The free market solves it. Not government. Government only interferes. EVER. Want a higher wage? Up your skills.
Finally someone says the true reason for inequality
Most people will spend all their stimulus on bills versus investing. These are people behind on mortgage and rent payments. They know it will likely be the last stimulus check so they will be careful. We will see deflation not inflation, especially in the CPI.
What about the banks SLR? Without the exemption wouldn't they have to buy a lot of bond?
Powell is not going to lose control of the bond markets. I think you’re on to something with the SLR, this is the ACE up his sleeve, another tool.
There's always a wisk in anything we do
and risk too 👍
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stay there
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Americans are savings alot more than ever so I buy the inflation argument, but it’s hard to see it as temporary since most people aren’t significantly impacted financially by the pandemic. What you have is the greatest shift in income equality in modern history, so the people with money are just fine with inflation but the people coming out of this pandemic in really bad shape will have to less income but higher inflation to deal with.
These pundits always say a whole lot of nothing, "this may happen, or this may happen" the end.
These pundits are totally useless, why can't they predict the future with 100% accuracy!!!!
Ask yourself: are there some things in the universe too complex for anyone to know for sure? Do you think maybe the economy is one of those things? The economy is made up of billions of people, some more weighted than others, making decisions and reacting on the fly. So do you think maybe the economy is one of those things?
someone who claims to know exactly what the future holds is much more suspicious. if one can't hold the idea that the world is not black and white and there is a whole lot of unpredictability that (e.g., virus, inflation, supply chain disruptions, geopolitics, natural disasters, etc.) at anytime can wipe out a long-held thesis, good luck in all you do...
he usually babbles quite a bit. But he's straight to the point in this interview. Play the video from 6:33 to 6:54.....he's pretty much telling u exactly what you should be doing.
This mantra of "the inflation is temporary" reminds me of the real estate agent in the movie The Big Short, that called falling house prices "just a gully". There is absolutely nothing to suggest this will be temporary. In fact inflation pressure has been building for years but we have been able to export most of it until now. When it finally comes, it will take years to play out.
Inflation when most people can't even afford rent, lol that's not happening any time soon. 2008 crisis in the big short was deflationary by the way.
Noticeably, he never mentioned spending the stimulus check on rent or food. It's a very Alice in Wonderland world we are in.
It's the creature of Jekyll island at the climatic peak
Agree.
Well, that wasn't the question, because it was assumed that people who were concerned about food would buy food. If you're in a position to invest it, you're not worried about food.
Exactly, most of the people getting the check will spend it on past due bills, not much else. That's deflationary in my opinion, because they aren't receiving nearly enough. When the eviction moratorium expires expect deflation in the housing and rental market.
if we have an inflation problem now what will more QE do?
Hyperinflation
I don't understand this . the stimulus check is not for people to invest . it was approved under the pretext that people can't afford their basic expense of living. investing means you already have some surplus !!
Thanks......for wat-ching.....
Exactly, the poor spend it on living expenses out of necessity and save nothing, while those that don't need the stimulus assistance invest it and get even richer. The lower class is getting smoked.
I know people investing stimulus checks. Not everyone receiving them are in need.
@@vanessa271 so why they receive it ?!
@@red149 they never asked for it...it just got deposited into their bank accounts. My friends are grad student and still financially dependent on wealthy parents so they don't need the money.
El, this is a much better outfit. Good one. Keep it up!
Great
Poor people think of what they can buy with their money, Rich people thinks of what they can invest in with their money 💰💰💰
The rich stay rich by investing and investing without stopping then the poor stay poor by spending like the
Rich but yet not investing like the rich
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Inflation is transitory, like it was in Germany in 1923!🤣😂😅
Gas and food prices up 10% homes and rent up like nuts. And fed telling us we need higher inflation?
What if the bond yield is 20 pcent and still no one wants to buy it?
TODAY IF YOU HAD $ IN THE STOCK MARKET CONSIDER IT LIT ON FIRE AND GONE. SORRY. ALL HOT SECTORS WERE BASICALLY WIPED OUT. I THINK THE POOR ARE THE NEW WELL OFF NOW. SAD BUT TRUE.
the only thing in the titel i disagree on is: it « may » ... it will
that is y Buffet bought VZ for dividend and very low PE of 13 as per finviz. = undervalued plus moat and dvies. today FAANG tank while VZ went up 1%.
lmao Warren doesn't care about economics he literally said that in one of his interviews. This is hedge funds
He's been so wrong for a decade since 2009. He does not understand deflationary pressure.
WRONG. EVERYTHING from commodity prices to property prices are soaring. We have INFLATION whether you want to accept it or not.
@@richardl.currier4052 YOU are wrong. The in crease in commodity prices is NOT inflation.
@@jawedz You are so wrong and you know it. I only hope you get educated.
Right now: MONEY SUPPLY is INCREASING, USD is WEAKENING, BONDS are in a BEAR MARKET, commodity prices are SKYROCKETING, food prices are through the roof, and oil will be pretty soon. Prices paid index is the HIGHEST since the 1980s.
@@richardl.currier4052 You are so wrong. Look at core inflation.
@@jawedz CPI is a VERY NARROW subset of price measures. Even the Fed says we will get inflation over 2% on the CPI! If you know the history of CPI you know that it has been altered to understate inflation. On the other hand, all those factors I mentioned above, along with INFLATION EXPECTATIONS, are going UP.
The Fed is intentionally creating this "situation." All they have to do is say that the amount of stimulus needed is less than anticipated or that they will intervene to keep long term bonds down. Problem solved.
Is not the fed is stupid people selling
@Burt Gummer Better to delay it until the economy is back at full employment. People are going to spend a lot more if their houses and stocks are worth more.
@@joelreyes9600 it’s the algo trading response to yield
Interviewer - How does one invest in their stimmy check?
Mohamed - You have to pick the right stocks
Me - thanks, that was completely worthless
investing, not trading dummy
No. "Economic growth" is not "better". We are so far past a reality in which "economic growth" is a good thing that it is sickening every time a so- called expert recites the same tired and corrupt mantra. We do not need more stuff. We do not need to consume more.
Real estate is way out of control let the market crash
Inequality means set your alarm clock
She has the dirty librarian look going on
I'm pretty sure she washes her hands. So, she's probably a clean librarian, if anything, thank you very much! :P
What are the chances that we have long-term inflation due to extended supply chain disruption, fueled by people reluctant to go back to work and fill in the gaps in the supply chain, unless they are paid significantly more than unemployment benefits.
Inflation, Stagflation or deflation , this falling apart economy just pass the red line long time ago.
Fed bigger problem will be upcoming deflation. Not inflation. Inflation is after the collapse of this 40 year bull market. He is too early like every one else tripping over Inflation. Inflation will show in the next decade not in 2021
Alternative to stock? Really? 🤣 Where are the bonds with +30% interest?
lmao
The bond market is Banking that REPLACEMENT Rescue America dollars is inflationary. Nothing that's a replacement for normal cash flow can be anything but sustainment of status quo. What part of inflationary is wrong is not understood.
correct, it simply the government telling the market specifically the FANGplus tesla,,, to pay higher interest
It is if it's all distributed at once. If the government staggers the payments, not so much.
But giving a group of ppl, programmed to consume a hoard of cash, all at once, after being locked down for a year, you're definitely lighting dynamite.
I've been out of town on business for 3
months. Just recently tried to rebook my hotel room, they're completely booked until mid April. Huge casino town, do the math!
@@millertoyal So much conflated.
First the desire to get out is being borne of the 90% of the country that's employed, full hotel rooms are not revealing of anything but pent up demand built on cabin fever, a passing fancy. The $1400 is one shot, but the rest is drizzled mostly into pockets of poor to middle class over 6 months that have bills to pay. State government dollars are replenishment, not windfall. If I take the family out to a restaurant, which has been out of business 75 %, it's a restoration of business, bills get paid first, that's not a splurge.
Haven't thought of this angle, so you're saying for this reason we won't see inflation?
@@WyattBrown377 Correct. A bunch of this money makes people whole, not throw parties. They'll be paying back rent, not forgiven, just deferred. They'll squeeze every dollar.
9% stock growth versus point 25 bonds.
Your guest is adorable.
Monetary policy will be something the fed can control it will be short term relatively, the real issue is China slowing down it’s central bank and the holes in the supply chain being exacerbated. That would bring real and long term inflation especially if our congress doesn’t force a real trade war to stop the reliance.
Feels good knowing they Wana Kno wat I'm gone do lol!!!
Real return bonds are the only bonds to own right now.
Think about the people that are getting stimulus checks. A lot of them should pay off debt or build an emergency fund.
"How would you invest your stimulus check if you were getting one?" Lmao...
I invested my stimulus today ,when I went to the dealer for a tune up,oil change, tire rotation ect. And get my routine maintaince up to date on a 4 year old vehicle . , they said it was going to be 1800 to do all the routine maintaince that was needed , so by the time I left at the end of the day my entire stimulus check was spent and I had to add more to it for just routine maintaince on a 4 year old vehicle. So mine is gone after day one
@@notgunnadoit7461 I agree. I am going to invest my $1400 in gold, silver, a couple of road machines and pick up a farm or two.
@@notgunnadoit7461 lol you going to buy all that with 1400?
Most of it will be invested in marijuana, alcohol, Bitcoin and Tesla. The remaining will just be wasted.
@@donm565 Hopefully there was a lot more done than an oil change and tire rotation, those should not cost anywhere near $1800. 4 years isn't that old, unless you've put a lot of miles on it already.
Inadvertently?
El Erian is the master at rambling on like a true economist with no actual use.
No such animal as temporary inflation. Real inflation is in excess of 10%.
The economy is headed for "Weal Wisky days"
How many languages can you speak fluently?
You made me laugh so hard
But i have tremendous respect for him.
@@lainiabraham2777 I can speak three, it was not meant to make fun as I do respect this fellow.
6.5%???
That’s about what the true inflation is today. Shadow stats
@@slowridefpv9668 CCP stats
@@slowridefpv9668 yes but the context as I heard it was about growth targets.
They want, they beg for inflation, but they are more afraid for deflation, or worse stagflation.
Because the Fed's policy is always inflation, this is one cause of inequality. Because the US government has put a high price on college education so many young people are in debt and wages are low. This will cause a lost generation unless there is a significant change in policy by both the Fed and the US Treasury.
Hey! No problem! Need money? Just press a few buttons on the computer and money magically appears. Don't worry. Be happy!
:-) :-) :-)
Get your popcorn ready and sit back. This upcoming battle between the Fed and the bond vigilantes will be EPIC!
Thanks......for wat-ching....
W.....T.....H.....A.....S.....A.....P.....P
+1...3...5...2...6...0...9...9...8...4...0
Don't fight the fed
End the FED.
Create a liquidity problem, hail liquidity problem!!!'
Summary: Things could go this way or they could go that way. Time will tell.
Government bonds are not risk free assets. A 5 year TIP at -2% is a guarenteed loss of purchasing power.
He's been wrong for a year now. CNBC won't have him now? So Yahoo finance take him?
Mohammed sounds like Lilly Von Shtup in Mel Brook's hilarious BLAZING SADDLES. *~XDDD*
Where should people invest their stimulus check? The Meek shall inherit the GameStop.
Buy when stocks go on sale. Just pick the right companies
question> What does he mean by "the feds will loose control of the bond market"? To whom?
The "Fed"eral Reserve sets their short term lending rates, which allows them to manipulate all rates throughout the risk curve by domino effect. However they really can't control the long end if the bond market disagrees with them.
@@eyeconspiracy very interesting
" monetary inflation "!!!
This is probably the highest liquidity level the U.S. economy will see for several years (barring any more rescue money being needed soon for a potential stock market crash or some other type of emergency). Fed market stimulus actions and government stimulus checks have our economy (and the sock market) awash in dollars. The M2 money supply rocketed upward and is totally bloated. Since inflation has been defined as “too many dollars chasing too few goods,” the next three years will be very, very interesting. It will be fascinating to see how all those funds get absorbed. Watch out when the 10 year U.S. Treasury yield hits 2%. That’s when the fireworks show will likely begin with the bond market.
I am not sure if he is right when he says that the FED inadvertently made the rich richer... there is indeed the quantilion effect but nothing beats greed and selffishness... I am long ropes and lamp posts.
The price of gold 🏅points to deflation.
@JustWatch124 what happens to crypto if the grid goes down. Only gold and silver has lasted for thousands of years.
@JustWatch124 I don't have large bars lol. Small size and a stocked pantry. Cash and some tradable items and 6 vehicles. No debt. But the grid issue is a real concern. Parts and outdated. Our grid needs serious upgrades. Just saying. It's a national security concern 😟
07:16 hahaha This is unbelievable
Lol, WTF. This is insane. These people said the exact opposite only a few months ago. Who ever claimed markets are rational. It’s no longer possible to win at anything, and by win i mean survive. And by survive i mean prevent myself from stabbing myself in the face with a spoon. Im sure the bond market would be unhappy with whatever that was to yield.
6:55 more than 7% growth in GDP in the USA?! is this the dollar milkshake theory?
Inflation Target is expected to be Rampant and they know it to be the case. In fact Inflation will enter Venezuelan Level Event. 1Million Percent Inflation is very probable under such Debt Load.
Appreciate the content. Appreciate the thoughts he expressed. That said, every time I see this guy or hear this guy, I get up, get a glass of water, and make sure there's not too much salt in my water...
In other words, if this was said to the tune of Jeopardy:
WhAt Is yIeLd CuRvE CoNtRoL ?
That's what I did. I invested my stimulus money in most volatile assets. I bought ammo with it
wisk assets, mawket cowwection
How many languages can you speak?
@@lainiabraham2777 three actually
savvy investors buy fear and sell greed. Load up on bonds folks.
all by design
Am I the only one that is sick and tired of hearing "Pent Up Demand" ? Are you going to watch 200 movies in one night? How many dinners can one eat at one setting? Pure Bullshit.
Finally some stock correcting aka crash again to overpriced stock prices.
Silver.
People are dumping cash and they're buying hard assets. 100 trillion fake dollars will be chasing a very very limited amount of gold silver bitcoin copper and others. Yields would rip and we have an insolvency event. Stagflation.
I blame all these trade algorithms. 90% of the market since the 80s have been computer automation trading through human made algorithms. Humans make errors. Why are they making software to trade and have a say what does what where and when.
Also Inflation is fear mongering by the banks. You gain more purchasing power as a borrow than the day before if inflation rising. The banks are the losers
House value increases. Etc etc
I think, he thinks, they think, we think, overall nobody knows what the hell is going to happen