For some time now it has been the belief of many Fed-watchers that the Federal Reserve would continue to hike interest rates until it “breaks something.” Lyn Alden of Lyn Alden Investment Strategy returns to Forward Guidance to argue that the stunning collapse of two large U.S. banks represents such breakage. Alden tells Jack Farley that this damage will soon give way to a period of low real interest rates, where inflation runs above Treasury yields. Filmed the afternoon of March 15, 2023.
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Today's show is sponsored by Public.com: Get a 4.8% yield when you open a government-backed Treasury Account by going to https://public.com/forwardguidance
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Alden’s writings can be found at https://www.lynalden.com/
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Timestamps:
(00:00) Intro
(00:43) The Cause Of The Turmoil In Banking System
(07:08) Are Rising Interest Rates Actually Good For Banks?
(08:50) Alden's Outlook on Banks As A Business
(12:47) Has Something "Broken"?
(15:38) Interest Rate Risk In The U.S. Banking System
(22:43) Public Ad
(23:48) Will Banks Become More Cautious About Making Loans?
(31:11) Is The Fed's Campaign To Raise Interest Rates Over?
(38:37) Debt, Demographics, and MMT (Modern Monetary Theory)
(53:28) Recession Risk
(58:48) Stock Market During Financial Repression
(01:01:29) Fractional Reserve Banking and "The Narrow Bank"