The Federal Reserve and Treasury painted the U.S. into a corner with its Quantitative Easing to save the banks and brokerage houses after 2008. The policy succeeded in supporting and even raising real estate prices, and providing arbitrage opportunities to borrow at low rates to buy higher-yielding stocks and bonds, vastly increasing the magnitude of financial wealth. This has been especially the case since the pandemic, creating an estimated trillion dollars in “capital gains” (including short term arbitrage) for the wealthiest One Percent.
What seemed to be the financial death trap was the prospect of rising interest rates ending the free lunch of interest-dividend arbitrage, and easy mortgage money. The threat was to reverse the asset-price run-up. We already are seeing that in recent weeks as stocks plunged to reflect the rise in Treasury bond rates.
But by now, 14 years after the Obama bailouts and QE rescue of insolvent banks, a new condition has emerged: a vast sum of private capital seeking to move out of the financial
— source michael-hudson.com | Michael Hudson | Jan 27, 2022