RE:RE:RE:IVN is a Bet on the Global Recovery I've thought of that Chintzy. They're assuming the same scenario will play out as in 2009, where government infrastructure spending will send copper soaring to $4 lb. Traders now expect the government to be the biggest player in the markets, be it bonds, stocks, or metal prices. We have transformed from a largely free enterprise economy into a command economy like China. Where China has SOEs (state owned enterprises) we in the West have heavy government intervention in the markets. For all practical purposes there is little difference. The Fed owns more than 25% of the MBS market. That is the reason housing prices are high. The Fed is pushing them higher. Same with corporate bonds. They plan on buying 9.3% of the corporate bond market in coming months, and that's just for a start. Powell has said Fed buying power is unlimited.
Traders are assuming the government can just keep printing money, racking up astronomical levels of debt, and there won't be much blowback to the economy or currency. This time I don't believe that's how things will work out. If there is a second wave of the virus in five months, in my opinion, the global economy will be gone. And the fact that we believe we're invincible, that ever higher levels of government debt are the answer to all our problems, will be the undoing of our civilization. In my opinion, unrestricted government debt will lead to a watershed moment: a turning point in the decline of the West.
There is a simple formula for a successful civilization: Work hard and pay your debts. We're doing something else.