I been researching Ray Dalio's work and have a trouble understanding the concept of "Beautiful Deleveraging". To me, it is just matching the movements of deflation with inflation.
Reading about this concept of "Beautiful Deleveraging" gave me the feeling that the Federal Reserve can go beyond the laws of nature and stabilize the economy when companies have to face the issues with having too much debt and bad business models/direction. Let them fail so new companies can take its place.
Well..the market is going up- so the Fed can effectively cancel a recession? Keep asset prices stable via QE when values should go down due to economic reality? I don't think the printing of money would go directly to the places where deflation is occurring...wouldn't the mismatch cause more wealth inequality? Those who get the benefits of money printing versus those suffering from the effects of deflation may not be the same?
It feels that we don't have a free markets because the Fed keeps escalating their actions. The Fed buying bonds feel disconcerting as they are acting more like a market participant.
I'm just trying to further my understanding. Thanks guys!
Submitted July 04, 2020 at 11:02PM by therivera https://ift.tt/3e1N7j4
