they work well until they catastrophically come off the rails

KEN GRIFFIN: “I don’t know what that moment will be, when there is an auction that goes awry, or when the markets become dislocated. Financial markets, generally speaking, work very well until they catastrophically come off the rails. You don’t necessarily get a lot of warning that there’s about to be a big event. The crash of ’87 is a great case study. That day, I woke up, I was in my dorm room trading then, and the stories of the day were about a small skirmish in the Middle East, of frankly no consequence, and the health of First Lady Nancy Reagan. And yet, we ended that day with the stock market down twenty-some percent, and a number of American financial institutions literally on life support or near death. It happened in one day. One day. There was no big story that morning that would make you think that that day might of been the end of the U.S. capital markets as we knew them. There was no warning. And so I worry that the debt crisis may have a similar construct. That there’ll simply be a day where a major auction fails, and then you see a panic start to brew in the Treasury market. And the question will be, how fast will the Fed intervene? What panic will that induce? Because government intervention under duress often creates more panic. And then do we see a flood of treasuries coming back into the market from holders around the world?

 Bloomberg Live (YouTube) – May 14, 2024. That’s from Santangel’s Value Links.

Reminded of McMurtry on stampedes and crowd behavior.

Lyn Alden had this:

In the United States, there has been quite a big gap between haves and have-nots with this fiscal and monetary mix. Those who don’t have much assets, like mainly a house, have been largely locked out of owning assets. Meanwhile, those who have assets and who have locked in those low rates, are generally in great shape, save for the fact that many of them are now kind of “stuck” in their existing home. And since the top 50% of consumers spend a lot more than the bottom 50% of consumers, the fact that the top half is doing pretty well has been a strong engine for overall consumption.

strong engine for overall consumption.