The Fed is taking money out of risky markets to contain inflation, but the economy won’t accept it, says former Bitmex CEO


The former CEO of Bitmex, Arthur Hayestold a story from his past as a Deutsche Bank trader and drew a parallel to what is happening in the US economy led by the Federal Reserve.

An unusual bet at Deutsche Bank

In a highly entertaining post and highly engaging read, Arthur Hayes recalls a remarkable moment in his life in Hong Kong as a trader at Deutsche Bank, when a co-worker nicknamed “Killah” said she could eat 10 Big Macs in a row in a row. of two hours.

The challenge quickly turned into a gamble, involving a whole department of people used to taking financial risks and, as a group of “monkeys in the know” (bored apes), gathered around an office table with all 10 big macs and Killah in the middle, ready to prove he could eat it all.

The German bank traders’ show was interrupted in the middle of the revelry by a senior analyst who yelled at them to stop and get back to work.

Arthur Hayes compared this unusual event to what is happening with the monetary policies of the Federal Reserve.

High inflation, high interest rates and enough market

“The Federal Reserve thinks it can eat Big Macs made with 50 percentage point increases without the US and world economy throwing up violently. We are only minutes away from the competition, and already the risk asset markets are begging for some high-ranking politician to yell ENOUGH!”

According to this graph, the month of April was especially bad for US households, whose inflation-weighted average salary was found to be in negative levels, showing that the middle-income household in the US literally loses money to inflation and ends months Due to the Federal Reserve Press.

Font: Bloomberg

These results are a nightmare for any politician in the midst of an electoral campaign and, although they are an absolutely expected and predicted effect due to the political decisions of the Central Bank, which has its tail glued to the current government, the one who will pay the bill is the market itself.

In an attempt to improve the image of the government to get more votes – the beautiful democratic system running at full steam – the Federal Reserve has been raising interest rates, buying the US Treasury bonds that are more attractive with this increase, profiting more and at the same time. time to attract capital from fixed-income investors.

All this causes a lot of money to begin to flow out of risky assets such as stocks and cryptocurrencies.

In a clear bear market for both financial asset classes, the market is about to “puke up all the big macs” as the Fed continues to “shove” irresponsible policies down the throat of the economy.

Arthur Hayes concludes by saying that any economic recovery, whether in the stock market or Bitcoin Y ethereumdepends solely on a change in the Fed’s financial positioning, but the market may already be very close to the price bottom of both.

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