Odd Lots Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making
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May 13, 2024 Join Viktor Shvets, a Macquarie strategist with a keen eye for global macroeconomic trends, as he discusses the Federal Reserve's precarious position. He argues that the Fed has become a 'prisoner' of its own data-dependent policies. Shvets explores the implications of recent inflation data for interest rates and examines the repercussions of the Biden administration's tariffs on China. He also delves into generational shifts affecting investments and critiques the Fed's communication strategies in an evolving economic landscape.
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Fed's Policy Trap
- The Federal Reserve is trapped by its data-dependent policies and the "dot plot."
- This creates volatility and increases the chance of policy errors.
Risk Migration
- Abundant capital, instant repricing, and central bank interventions create a low-risk environment.
- Risk migrates from markets to politics, society, and geopolitics.
Volcker's Legacy
- Paul Volcker's policies created a system of global capital recycling and a debt-based culture.
- This led to an overabundance of capital and financialization.