FED, Ben Bernanke, JOE discussed on Stansberry Investor Hour


The discounted cash. Flow estimated future cash flow. So that's that's the way things worked way back when and as I say, I think that that that model was reasonably helpful. But so fast forward from two thousand and eight to the present day and much of this model is now dysfunctional the the reserves in question are in excess of needs in some of more than about a trillion and a half dollars a trillion point four. So the the federal funds rate has a lever has lost its potency. And so, where's the fed do it? Well, it, you know, it's still has the capacity to create credit, but the transmission mechanism as they say is is not what it was a lot. And so it's it's much harder to connect these the impulse to the outcome in any direct way. But what the fat has retained is the capacity to work through the imagination of the market. So never mind the the primary never mind the impulse of the fed binding securities in credited the accounts of the bank's never mind that for a second just consider that when the fed takes action say to cease and desist the normalization of. Its policies as it did early in January. It sends this kind of electric brainwave into the markets head suggesting that the fed will ever be on guard against market declines. And if it sees him walking declined coming it will stand by to loosen policy to lower interest rates and to infuse the banks with new credit. So I think that the the current model the fed you asked I'll number of minutes ago, how functionally this works, and I think the way it works now is to condition the market to expect evermore credit in support of ever higher asset prices. And so I I think it's become a psychological connection rather than mechanical one. Well, that was a fantastic. Thank you. But it sounds like, you know, they sort of had things rigged. And then they broked I'm sorry. They broke their own machine. They kept using it in broke. The bull market was young. Ben bernanke. You got on the sixty minutes Joe and looked into the camera. And so they can raise rates and five fifteen minutes if they wanted to if they had to. But time passed and wouldn't you know, it we all became acclimated to very low funding cost, in fact funding costs in some cases.

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