The Fed Saves the World?
Once again, the Fed tried on the mantle of Batman saving the world: this time, corporate bonds became the object of her purchases - including “junk” bonds of companies with precarious financial situation. It seems that the Fed has begun to finance the real sector directly, bypassing the banking system, realizing that the liquidity provided to banks does not go any further. Banks can be understood: it is not clear whom to lend to, in the "post-covert" economy there are only walking zombies and potential bankrupt.
Nevertheless, it seems to us that the Fed will not be able to prevent a large-scale wave of defaults: the volume of debts is enormous and exceeds the volume of money supply / balance of the Federal Reserve by an order of magnitude. “Printing” so much simply will not work, without a significant devaluation of the purchasing power of the dollar.
At the same time, in Europe and Asia the situation is even worse than in America: in Europe, social populists rule the ball, for any reason ready to sacrifice the economy for the sake of political expediency. High taxes, a heavy regulatory burden, budget deficits, and - at best - a stagnant economy. Asia is drowning in a gigantic ocean of debt, much larger (in relation to the size of the economy) than in America.
According to some reports, over 100 countries have applied to the IMF for financial assistance. The Fed opened a $ 500 billion dollar liquidity swap line to foreign central banks.
“Will the Fed be able to save the world from a gigantic wave of defaults (including sovereign ones) and a monetary crisis by large-scale emissions? .. We believe that this mission is impossible. But they will definitely try. ”
Despite this, the US dollar - as the base currency of the existing monetary system - still looks like the best of the existing alternatives, such as the euro or the yuan.