THE WOLF STREET REPORT
The stories behind business, finance, and money.
Episodes
Fundamentals for markets have boiled down to QE or QT since 2009. Now there’s QT, a lot of QT, globally, to battle the worst inflation in decades.
Most people in finance today cut their teeth in the era of Easy Money, when history books were thrown out the window.
The Fed ended Free Money, and the only thing it broke is the consensual hallucination that spawned during the Free Money era. And look what we got.
Some markets are already deep into it, others just started. A sobering trip from the free-money decade in la-la-land, back to normal.
Drunk with Easy Money, companies were hogging office space and workers for a future that did not come.
The Crazy Stuff and Crazy Asset Prices that arose during Easy Money started blowing up when Easy Money ended.
As the FTX collapse shows, the shenanigans guarantee smooth, efficient contagion inside the crypto zone. But beyond it?
Raging inflation knocked out the “Fed put,” and banks are no longer on the hook for mortgages; taxpayers and investors are.
Deficits don’t matter – until the bond vigilantes ride into town.
The Fed will tighten “Until Something Breaks” and then pivot? Wait a minute...
Higher interest rates and mortgage rates for much longer, with lower asset prices, as the Everything Bubble gets dismantled.
Biggest investors in single-family houses: “We need to be patient and allow the market to reset.”
One of the most important dictums in US finance is this: “Don’t fight the Fed.” And this could get ugly.
Shedding People, Offices, and Warehouses. It’s kind of sobering. Reality has that effect, after a drunken binge.
The USD had a heck of a ride, which kept inflation from spiking even further. But it may not last much longer.
That’s what’s different this time: Stuff is blowing up because of leverage, and the blow-ups cascade through the crypto space because everything is now interconnected. Those weren’t factors in prior “crypto winters.”
This crash beneath the surface showed something had broken, that the magic had died, that hype and hoopla were suddenly unable to carry the day.
But we’ve had it so good for so long. And it was so easy, and it made everyone look like a genius.
Dotcom Bust 2 has begun. Only bigger.
The dollar’s role as dominant global reserve currency is at risk if the Fed fails to crack down on inflation.
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