tag:blogger.com,1999:blog-6616959642391988608.post6924965722296634776..comments2024-03-28T00:18:25.641-07:00Comments on Calafia Beach Pundit: Everything's down except inflationScott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger38125tag:blogger.com,1999:blog-6616959642391988608.post-57814134290698987892022-10-07T06:32:48.779-07:002022-10-07T06:32:48.779-07:00The problem is that the FED doesn't know that ...The problem is that the FED doesn't know that it's already tightening. Not only does the FED eschew the notion of monetarism, but it also eschews the notion that there is a lag to monetary policy. The FED conflates hiking interest rates with "tightening". Another hike in the administered rates will come at the same time long-term money flows are already decelerating.<br /><br />Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-39351106895423013402022-10-06T15:30:00.758-07:002022-10-06T15:30:00.758-07:00LSAPs create new credit. The monetization (operati...LSAPs create new credit. The monetization (operations of the buying type), and sterilization vis-à-vis remunerating IBDDs (destroys velocity) decreases the demand for loan funds, while increasing the supply of loan funds.<br /><br />It's an artificial suppression of real interest rates. It's backwards. Whereas the activation of monetary savings by the intermediary financial institutions (Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-83463731808089839462022-10-05T19:46:14.457-07:002022-10-05T19:46:14.457-07:00-As a result of relative scarcity of Treasury bill...-As a result of relative scarcity of Treasury bills (despite high issuance, the Fed was buying them all), money market funds had nowhere to turn to but the reverse repo window at the Fed.-Carl<br /><br />I do not disagree with you.<br /><br />But the relative and market-driven scarcity of Treasuries should drive Treasury interest rates down.<br /><br />In other words, is the Fed artificially Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-77229909964259091312022-10-05T10:04:22.606-07:002022-10-05T10:04:22.606-07:00The FED's accounting is obviously wrong. If i...The FED's accounting is obviously wrong. If it were term deposits, instead of O/N deposits, maybe the accounting would be different.Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-71821343346154827182022-10-05T07:16:34.412-07:002022-10-05T07:16:34.412-07:00Simple Answer:
REPO: infuses capital into financi...Simple Answer:<br />REPO: infuses capital into financial institutions<br />REVERSE REPO: drains cash fr finacial institutions.<br />opchttps://www.blogger.com/profile/04904443537887164006noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-10138785295439392392022-10-05T05:02:16.821-07:002022-10-05T05:02:16.821-07:00"Is this a form of reverse QE? (QT)? Some say..."Is this a form of reverse QE? (QT)? Some say it is not.<br />The commercial banking system seems to like the reverse repos."<br /><br />From a balance sheet perspective, reverse repos are exactly the opposite of QE and both 'operations' are run concurrently.<br />Out of the 2.2T now outstanding, 1,9T accrued to money market funds.<br />Reasons:<br />-Commercial banks reached Carlhttps://www.blogger.com/profile/01792779708580094262noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-73734965509026210682022-10-04T17:47:08.593-07:002022-10-04T17:47:08.593-07:00Well, the Reserve Bank of Australia (RBA) raised i...Well, the Reserve Bank of Australia (RBA) raised it key rate only 0.25% yesterday instead of 0.50%, and that led to a rally in Sydney. <br /><br />I do not know why the Fed thinks it has to keep raising rates in huge chunks. Steady smaller increases might be better. <br /><br />BTW the Fed is also operating a huge "reverse repo" program. (This is so complicated it makes me want to go Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-39881948597671241292022-10-04T09:07:27.521-07:002022-10-04T09:07:27.521-07:00Strange, dangerous $US loop?
As I understand it, ...Strange, dangerous $US loop?<br /><br />As I understand it, because the UK (rest of Europe?) trades a lot in $US, and requires such trade (read de-industrialization of UK & Europe), the $US strength is causing a lot of pain.<br /><br />Pensions going bad because domestic bonds are tanking, requiring a bailout by the govt. This sounds like a kind of "bank run". People would be wkevinwhttps://www.blogger.com/profile/17600473578823788550noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-84178895418510061402022-10-03T06:40:39.717-07:002022-10-03T06:40:39.717-07:00The markets' problem is the Keynesian macro-ec...The markets' problem is the Keynesian macro-economic persuasion that the banks are intermediary financial institutions, the Gurley-Shaw thesis. Disintermediation is made in Washington. The payment of interest on interbank demand deposits induces nonbank disintermediation (like the 2019 repo spike) or a decline in the supply of loanable funds. I.e., the banks outbid the nonbanks for Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-7530093301894856892022-10-02T13:05:45.245-07:002022-10-02T13:05:45.245-07:00Historically, the markets bounce when R-gDp rises....Historically, the markets bounce when R-gDp rises.Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-65013837400900255802022-10-02T12:42:40.253-07:002022-10-02T12:42:40.253-07:00Income velocity, Vi, is meaningless. Vt may move i...Income velocity, Vi, is meaningless. Vt may move in the opposite direction. The rebound in R-gDp is due to the reversal of money flows. The demand for money has fallen, while the means-of-payment money has risen. It is likely to force the FED to tighten faster than now expected.<br /><br />Link: George Garvey:<br />Deposit Velocity and Its Significance (stlouisfed.org)<br /><br />“Obviously, Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-91232546233463024692022-10-02T09:42:22.502-07:002022-10-02T09:42:22.502-07:00I use a few (~4) indicators to estimate GDP, which...I use a few (~4) indicators to estimate GDP, which are coincident or lagging. So far they have not shown recession. They have been flat to slightly improving over this calendar year.<br /><br />I use about 5 asset classes to monitor the financial markets, which are somewhat leading indicators for the economy. All of these are now pointing down.<br /><br />This bear market hasn't lasted wkevinwhttps://www.blogger.com/profile/17600473578823788550noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-50833249923502433262022-10-02T08:40:23.166-07:002022-10-02T08:40:23.166-07:00"Have you pondered that we are following the ..."Have you pondered that we are following the footsteps of the BOJ in the late 80s and our Dow may follow the pattern of the Nikkei?"<br />Please elaborate your thinking.<br />-----<br />In the late 80s, the BOJ started to tighten in order to contain inflation pressures which were building and then (up to this day!) have tried to ease enough in order to get the productive engine going Carlhttps://www.blogger.com/profile/01792779708580094262noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-37329038539055394082022-10-02T07:30:29.005-07:002022-10-02T07:30:29.005-07:00Have you pondered that we are following the footst...Have you pondered that we are following the footsteps of the BOJ in the late 80s and our Dow may follow the pattern of the Nikkei? Jimhttps://www.blogger.com/profile/04220423345735345059noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-27280019533210438552022-10-02T06:35:00.895-07:002022-10-02T06:35:00.895-07:00"Velocity, typically defined as the ratio of ..."Velocity, typically defined as the ratio of GDP to M2 (which is the flip side of money demand, M2/GDP) has picked up from a low of 1.074 in Q2/20 to (I estimate) 1.7."<br />From the Fed:<br />M2 velocity Q2 2020 1.112 now 1.165<br />If you adjust for excess reserves (asset inflation not consumer inflation money flows):<br />Adjusted M2 velocity Q2 2020 1.346 now 1.381<brCarlhttps://www.blogger.com/profile/01792779708580094262noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-49039559405628075002022-10-01T17:47:08.597-07:002022-10-01T17:47:08.597-07:00I sense that the Fed intends to accelerate expansi...I sense that the Fed intends to accelerate expansion of the money supply , and that the Fed (and other central banks) are using interest rate hikes to mask the intended expansion of the money supply -- said another way, the only way to save the dollar is to conjure more dollars ad infinitum -- global de-dollarization is the center of gravity for the US today -- crime, pandemics, famine, war, and McKibbinUSAhttps://www.blogger.com/profile/10545798495680527622noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-79171519845958596732022-10-01T14:37:34.043-07:002022-10-01T14:37:34.043-07:00before the dot com boom/bust it was commonly belie...before the dot com boom/bust it was commonly believed 6% unemployment was full employment. the 10yr bond's avg yield was about 6% as well and was viewed as a balanced rate for growth. if you look at fed fund activities over the last 70 yrs you'll see the spikes. point is, we have been experiencing major inflation, but rates are far too low to combat HEADLINE INFLATION numbers (vs what opchttps://www.blogger.com/profile/04904443537887164006noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-25049678845395422452022-09-30T08:22:16.349-07:002022-09-30T08:22:16.349-07:00Re Argentina travel: You will find things are amaz...Re Argentina travel: You will find things are amazingly cheap just about anywhere in the country, but the further you go from Buenos Aires the cheaper things tend to get (but not dramatically so). Also, you should avoid going to American/International hotels and tourist trap restaurants, since they can be much more expensive. Go where the locals go and you won't be disappointed.<br /> <br />Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-41850306879990186372022-09-30T07:23:16.101-07:002022-09-30T07:23:16.101-07:00@AI re: "that took M2 out of the system.”
Sa...@AI re: "that took M2 out of the system.”<br /><br />Savers never transfer their savings out of the banks unless they hoard currency or convert to other National currencies, e.g., FDI. I.e., savings flowing through the nonbanks never leaves the payment’s system. There is just an exchange of preexisting deposit liabilities between counterparties in the banking system.Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-52147107707891869952022-09-30T03:24:00.146-07:002022-09-30T03:24:00.146-07:00Scott, thank you for your post and all the others ...Scott, thank you for your post and all the others I have read for the last fourteen years. You are insightful and wise. It is hard to believe that the Fed gets it wrong so often despite having immense resources including hundreds of PhDs in economics on the staff but they do. Secondly, I am interested in Argentina travel. Are your observations about prices there rural areas or big city? Kennethhttps://www.blogger.com/profile/01366772652626173281noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-18015266551693508332022-09-29T21:02:54.542-07:002022-09-29T21:02:54.542-07:00Scott, thoughts on LDI’s and it’s ability to have ...Scott, thoughts on LDI’s and it’s ability to have an affect on the US like it did in the UK?<br /><br />https://www.ft.com/content/f4a728a5-0179-48bd-b292-f48e30f8603cDanielhttps://www.blogger.com/profile/11220806915938960892noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-3961338483933022392022-09-29T13:53:07.030-07:002022-09-29T13:53:07.030-07:00Scott thank you for the post. As you mentioned, M2...Scott thank you for the post. As you mentioned, M2 doesn't grow for 6 months. However, the elevated M2 excess requires 5-6 years to be flat to return to the multiyear M2 line slop. Does it means that Fed requires to keep the interest high enough (higher than inflation) for the same period of 5-6 years to support demand over spending? Or I miss something?ebg investorhttps://www.blogger.com/profile/14513889673146997967noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-68507805436383801012022-09-29T11:14:46.924-07:002022-09-29T11:14:46.924-07:00Hello,
What about the story, that there is no buy...Hello,<br />What about the story, that there is no buyers for US bonds,rather forced sellers, i.e. Japan and China to name the biggest names. So the yields can rise much further decoupling from FED's policy.Adamhttps://www.blogger.com/profile/00325788638301535314noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-25333633795070350122022-09-29T08:19:46.490-07:002022-09-29T08:19:46.490-07:00Variant: you are correct. Shane confuses the level...Variant: you are correct. Shane confuses the level of prices with the rate of inflation. Inflation raises the level of all prices. If inflation falls to zero, the level of prices will no longer rise, but prices will be higher than they were before inflation went up.Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-50301367459486419532022-09-29T04:39:33.126-07:002022-09-29T04:39:33.126-07:00@Shane
I believe Scott was referring to absolute ...@Shane<br /><br />I believe Scott was referring to absolute prices relative to pre-COVID levels not the rate of inflation, which seems likely to settle in the ballpark of where it was before the pandemic.Varianthttps://www.blogger.com/profile/10734658464404629017noreply@blogger.com