Taps Coogan – August 31th, 2022

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Chris Whalen, Whalen Global Advisors Chairman, bank analyst, and author of The Institutional Risk Analyst and Joseph Wang, former Fed Trader, creator of Fed Guy, and author of Central Banking 101, recently spoke with Blockworks Macro about monetary policy.

While the discussion is fairly technical, it’s a must-watch for followers of monetary policy.

The over-arching challenge for monetary policy today is how to adapt the excess-reserve system created by way too much QE in the wake of the global financial crisis, and the trillions in low yielding assets it created, to a high-inflation & rising interest rate world.

As Mr. Whalen repeatedly points out, doing so is creating ‘ghettos’ of trillions of dollars of very low yielding financial asset that nobody is going to want to own and which are going to be very hard to sell. That, combined with the Treasury’s need to issue very large amounts of new debt in perpetuity while the Fed reduces its holdings, and the drop in mortgage demand, creates large liquidity risks for financial markets.

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