Taps Coogan – April 6th, 2021

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Wolf Richter, creator of the great website WolfStreet.com, recently spoke with Peak Prosperity to explain why he thinks the current market mania is a sign that we are near a major market peak.

The crux of Mr. Richter’s thesis is that historic valuation premiums, owing to excessive monetary accommodation and fiscal stimulus, are going to run into 4%+ core inflation later this year that will prove less transitory than the Fed anticipates, forcing them to tighten policy, and deflating asset markets in the process.

For what it’s worth, credit markets have been busy tightening themselves over the past couple months with treasury bonds, mortgage rates, corporate bond yields, etc… all climbing higher, which begs the question: Is the Fed going to need to raise overnight rates to tamp down on inflation or will credit markets do it for them?

In the meantime, policy makers around the world are going ‘all-in’ on the idea that more debt-financed stimulus can fix an over-indebted economy.

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