One interesting aspect of today’s Kafkaesque financial system is the negative US Swap Spreads curve.
The Federal Reserve of New York has an interesting explanation for this phenonenon: “Although we cannot precisely measure the costs SLR (dealer’s supplementary leverage ratio) capital requirements impose, it appears that executing swap spread trades is now more expensive for dealers than in the past largely because of the amount of capital that dealers must hold against these trades.”
More regulations imposing greater dealer costs? Say it ain’t so, Joe!
The myriad of banking regulations actually prevent normalization, even though The Fed is raising its target rates and reducing its balance sheet.
Can you imagine the growth of GDP if the US got rid of some of the Kafkaesque banking rules and Federal policies?