So I was doing some thinking recently and I finally figured the source of value for financial markets:
Step 1: Investor sees a delish piece of asset that yields 6%. He goes out and throws on 5 turns of leverage through his buddies at the BB GoldStan'Murica. Investor clips his 15% net carry.
Step 2: Investment bankers look at the repo and decides to tap all dem debt markets to juice their L + 150 paper so they also gets a 15% carry. Bank balance sheet becomes 20x-35x leveraged.
Step 3: Fed be like, "bankers, let me stuff you with $4 trillion of liquidity. Don't worry, I be printing paper all day." Fed balance sheet blows up.
Step 4: ?????? [** the hums of the printing presses printing hot and fresh paper]
Step 5: Profits for everyone. Global central banks contemplate tuning down the printing press. But all them cool cats in Europe and Asia are still running printing presses. 'Murica wants be remain in the cool cat clique and decides to never stop printing money.
Step 6: Central banks decide to charge 2&20 on their balance sheets
