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A deeper dive into the economy (Who’s driving the buss??)

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  • #16
    Stresses in global credit markets is rising. The Bank of England has joined the Bank of Japan in buying government bonds to cap yields. Both countries' central banks have intervened to strengthen their currencies. The dollar wrecking ball swings on and on. China is propping up the Yuan, albeit halfheartedly. Yield curve control and currency intervention are classic signs of stress in global markets. Here in the US watch for widening credit spreads and spikes in the repo market to reflect the likelihood that something in our money markets is about to break.

    How long can the FED go? The SPR will run out pretty soon and that'll put a floor in oil @ $80, so that component of CPI/PPI isn't going to continue to fall. What about housing? That's a lagging component. Labor is lagging as well. China still refuses to back off its zero Covid policy. The 3 drivers of disinflation of the last 30 years are over: cheap labor; cheap goods; cheap energy. Buckle up.
    Conservatism is the belief that a small subset of the people is protected by the law, but not bound by it, while another, larger group is bound by the law, but is not protected by it.

    ~ Unknown

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    • #17
      Yeah Whiskey, it’s finally starting to go down. Shit is about to get real. The dollar is hard to come by as hard as that is to believe and we can’t really print more. I always thought the beginning of the fallout would be more obvious in Asia, but it looks like Europe is going to be the first to feel the sting. It’s always the pensions though that take the brunt of it. They’re like the kids in the revolutionary war that walked into battle at the front of the lines only armed with flutes and drums. They never had a chance

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      • #18
        In response to the wrecking ball US dollar the UK is attempting Reaganomics: lowering taxes (a smidge for regular folks and way more!! for elites) and increasing government spending. As is typical of Tory governments and Republican governments it will wreck the sovereign balance sheet and increase wealth/income inequality. This is trickle down economics Brit style, but trickle down doesn't work. The wealthy aren't job creators. Small businesses are job creators. Small businesses don't create jobs by spending existing capital, they create jobs by means of credit expansion. The wealthy are not job creators, they are capital hoarders. Proof: In 1981 my partners and I employed 60 people. We didn't make squat, but we created 60 jobs. In 1982 I quit to became a sole proprietor and ultimately retired in 2013. Depending on the stock market my net worth ranges between $8-$10mil. In that 31 year growth period I didn't create a single extra job, or widget, or commercial entity. Zero. Zip. Nada. Nix. Bupkus. All I did was bid forestry contracts and generate fees for mutual fund/investment managers.

        The wealthy aren't job creators; they're capital hoarders.
        Conservatism is the belief that a small subset of the people is protected by the law, but not bound by it, while another, larger group is bound by the law, but is not protected by it.

        ~ Unknown

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        • #19
          Bear Sterns is fine.
          I’d buy Lehman Bros right now.
          There isn’t going to be any inflation…
          ok, there might be some inflation but it’s transitory

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          • #20
            Truth be told, it is transitory, because all supply shocks are transitory. The devilish detail is the time scale you're dealing with. But the thing that hasn't happened is persistent monetary inflation (as distinguished from CPI increases). QE wasn't money printing and it wasn't inflationary and I can prove it to anyone: Consider Japan. Japan has been doing QE since their market crash of the late 90s. Japan has waaaay more debt to GDP than the US, and the BOJ has waaaaay more debt to GDP than the FED. And Japan has been mired in growth-starved disinflation the whole damn time. The BOE had to buy Gilts to prop up the price. How could price fall if BOE QE was money printing? QE isn't money printing. QE isn't inflationary. QE is an asset swap between a central bank and a commercial bank involving bank reserves that never enter the real economy. Bank reserves are just an interbank token.

            Actually, what's happening is deflationary money stressing global dollar funding markets. The Swiss National Bank is seeking dollars from the FED in currency swaps because commercial banks all over the world won't expand their balance sheets in order to create dollar loans. They won't create those dollars because they don't trust the financial health of counterparties. That counterparty risk is what brought down Bear Stearns and Lehman Bros. BS and LB were shut out of the repo market because no one would give them overnight loans because no one trusted their collateral which was mortgage backed securities. Overnight they became insolvent. Ever since then commercial banks have been regulated to have higher levels of bank reserves/stronger balance sheets, and ever since then those banks have been loath to make loans and expand credit. We've been in a growth recession ever since. We've lost what Keynes called the "animal spirits" of capitalism. Sovereign debt issuance has taken up the slack, but as I've said, it's not the same form of money in the real economy, and the global real economy has suffered since the Great Financial Crisis. Macro is about rates of change, and the rate of change in global economic growth has been falling since 2008. It's deflationary. And now the world is screaming for dollars despite all the hand-wring and pearl-clutching about money printing.

            Conservatism is the belief that a small subset of the people is protected by the law, but not bound by it, while another, larger group is bound by the law, but is not protected by it.

            ~ Unknown

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            • #21
              You have to have some kind of background in finance. You’re educated buddy, if you don’t mind me asking, where’d you come up with this sort of knowledge?

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              • #22
                Also, do you have any thoughts on the dollar squeezing to unimaginative heights due to demand for debts only payable with the dollar, followed by a crash of the demand?

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                • #23
                  LOL. I'm just an asshole Boomer who's been invested since I was a late teenager. Self interest and capital at risk will make most people pay attention, so there's lots to learn. Believe it or not, YouTube is a good free resource for good discussion.

                  Check out Jeff Snider for specialization in Central Bank and commercial bank mechanics. His accounts of offshore dollar markets is the stuff I parrot alot. He talks about dollar-funding markets under the Eurodollar rubric.

                  Check out Lyn Alden for current and historical global macro cycle analysis. She's also very, very good on crypto. She's an engineer with excellent verbal skills and a unique ability to set aside politics and social bias. Wing-nuts co-op her soundbites to push apocalyptic themes, but her 45 minute - one hour interviews will show you how special her brain is.

                  Check out Brent Johnson for the Dollar Milkshake theory. It explains the dollar wrecking ball scenario currently happening. Watch the final scene from There Will Be Blood for the set-up to the milkshake theme.

                  Finally, check out Luke Gromen whose sovereign debt crisis and peak-cheap-energy thesis is riveting. He indulges political policy as an important economic input. He's an upper midwestern rustbelt kind of guy whose repressed vulgarity appeals to a redneck like me. He's anything but a liberal, and his criticisms of system guys like Obama and Biden are never curtailed, but his answer to our problems is surprisingly at odds with current conservative populism: it depends on a massive industrial policy to spend on and build: 1. energy production/infrastructure for both hydrocarbons and green energy; 2. onshore chip production much larger than Biden has already undertaken along with transportation infrastructure spending; 3. letting the bond holders of our sovereign debt take a beating through inflation and yield-curve-control that inflates away our sovereign debt over 3-5 year period.

                  Fun times
                  Conservatism is the belief that a small subset of the people is protected by the law, but not bound by it, while another, larger group is bound by the law, but is not protected by it.

                  ~ Unknown

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                  • #24
                    Damn. You know about the dollar milkshake. That’s what I was trying to get at in my last post. I can’t wait to talk to you more

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                    • #25
                      Ok. You are overloading my brain with info but in a really good way. I’ve never had the opportunity to pick someone’s brain like the way you’re sharing thoughts now. I’m incredibly grateful for taking the time to share with me because I’ll never randomly stumble across someone like you again

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                      • #26
                        Macro economics is a cocktail of factors. It's wildly complex and poorly understood. Even the mechanics of the banking system, which Snider excels in, are misunderstood by many analysts. Johnson may be right about dollar action in markets, but is he right for the right reasons? Probably, but as markets reach important inflection points other factors contribute unforeseen and exogenous inputs that can totally fuck up projections. Johnson has been bullish gold seemingly forever but even after every favorable condition has transpired gold has still been a disappointment. It becomes very theoretical even though it plays out in real time in real dollars ..... your dollars and mine. So one ends up pondering a scenario where both the dollar and gold rise. If that happens, what does it mean for equities and sovereign bonds and why and what does it portend for the future? Take a page from all four of these folks and buckle up.
                        Conservatism is the belief that a small subset of the people is protected by the law, but not bound by it, while another, larger group is bound by the law, but is not protected by it.

                        ~ Unknown

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                        • #27
                          Yep. Buckle up! Shit is going to get crazy

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                          • #28
                            Here are two interesting YouTube vids featuring Jeff Snider and Brent Johnson. Snider is a card, and he is becoming a singular personality in discussions of global macro and dollar funding markets. I suggest you listen to him first, and then listen him in tandem with Johnson. Johnson is more succinct while Snider can barely contain himself once he gets going. After you digest just these two vids you'll understand why it's so ludicrous to talk about "Bidenflation" and "money printing" in the simplistic memes that dominate media today. As I said earlier, it's much more complicated and much more misunderstood than just about anyone says. One thing to guard against is apocalyptic doom and gloom scenarios. When credit and collateral chains unwind at the end of cycles liquidation occurs exactly as it is explained in these vids. It's not the end of the world. But it really sucks.



                            Conservatism is the belief that a small subset of the people is protected by the law, but not bound by it, while another, larger group is bound by the law, but is not protected by it.

                            ~ Unknown

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                            • #29
                              Liquidation means redistribution more or less.
                              Bad bets that are very old need to pay up.
                              It’s going to be a shit show

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                              • #30
                                I’d be really interested to see if anyone can find the collective data on the amount of value of shares sold but not yet bought in the market right now. Surely it’s in the trillions

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