Monday's Markets Update (March 13, 2023)
I am sure that the majority of professional economists who have been critical of the Fed all this time thought on Monday that "I told you so" doesn't fully express what we all felt while listening to Biden's speech.
The sheer size of the professional incompetence of our so-called "monetary authorities" is staggering. However, we do not need them to have the spectacular mess we currently face. Any type of free-market, self-adjusting system would create the same types of financial cataclysms without Mr. Powell's brainless assistance. However, these crises would occur much earlier and for a much shorter period of time.
Nowadays, politicians often rush to the microphones without thinking things through and propose new, unnecessary regulations on top of the already existing ones, simply to secure their positions at the top of the bureaucratic pyramid. Next, they will appoint scapegoats who have nothing to do with the real culprits of this debacle.
Whatever actions they take, they won't change the equation or its result: the contemporary centralized monetary system cannot be fixed; it can only be replaced by a new system that is based on free competition among independent market agents, enhanced by a decentralized, impartial consensus mechanism to settle all disputes, and supplemented by UBI to soften sharp but short downturns for the most vulnerable groups of the population.
We cannot implement that system without first replacing the current generation of old orthodox ideologists who govern with much younger, more imaginative, and incomparably more tech-savvy political representatives. Of course, it would be even better to replace politicians with code, but that is a different story altogether. :)
It will probably take a very long time before we can realistically start talking about fundamentally redesigning the current financial system, which dates back to the sixteenth century, and converting it into the twenty-first-century open-to-everyone, on-chained, 24-7 market. Meanwhile, traders have to do with the same old Powell, his political cronies, and their outdated fantasies about how the real market works.
Some traders (especially those in the crypto market) still have enough optimism to think that, faced with the destruction he caused, Powell will try to avoid political backlash by repenting and pivoting from QT to QE. This is how BTC's unprecedented 18-percent two-day rally (from 20,455 to 24,113) can be explained. On the other hand, NASDAQ players kept much cooler heads and reacted more reasonably to the SVB relief program, causing the index to rise only 1.3% (opening: 11,041, closing: 11,188).