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So massive treasury issuance itself is the cause of eurodollar market contraction?
that's the theory. so much treasury paper is being issued [with LOTS more to come in future years] that it's soaking up dollars. add to that required repayment of usd denominated debt accumulated when the usd was still global king, also soaking up dollars. the fed's tic holdings will shrink as the securities are sold for needed cash. once the debt is payed down the tic will rise again while the dollar will fall. again: that's more theory.
on another note re chinese trade moving away from usd settlement:
that's the theory. so much treasury paper is being issued [with LOTS more to come in future years] that it's soaking up dollars. add to that required repayment of usd denominated debt accumulated when the usd was still global king, also soaking up dollars. the fed's tic holdings will shrink as the securities are sold for needed cash. once the debt is payed down the tic will rise again while the dollar will fall. again: that's more theory.
on another note re chinese trade moving away from usd settlement:
that's the theory. so much treasury paper is being issued [with LOTS more to come in future years] that it's soaking up dollars. add to that required repayment of usd denominated debt accumulated when the usd was still global king, also soaking up dollars. the fed's tic holdings will shrink as the securities are sold for needed cash. once the debt is payed down the tic will rise again while the dollar will fall. again: that's more theory.
on another note re chinese trade moving away from usd settlement:
Luke Gromen went over his take on this yesterday at MacroVoices.
i've been following him for almost a year, after another macrovoices appearance last fall. follow his twitter feed and subscribe to his "tree rings" product [not very expensive]. lately also following jeff snider, and just read the gavekal book i mentioned above.
the three paint a kind of interlocking, consistent, picture of what's happening in the world. slightly different perspectives, somewhat different ways of describing/explaining things, but much more complementary than contradictory.
i've been following him for almost a year, after another macrovoices appearance last fall. follow his twitter feed and subscribe to his "tree rings" product [not very expensive]. lately also following jeff snider, and just read the gavekal book i mentioned above.
the three paint a kind of interlocking, consistent, picture of what's happening in the world. slightly different perspectives, somewhat different ways of describing/explaining things, but much more complementary than contradictory.
Cool. I've been following Luke's Twitter account for a few months, lots of good commentary.
Gold might not break out as much in US$ terms, but I have no difficulty seeing gold AND the US$ both rising simultaneously in a world where real interest rates are negative in the other major currencies.
From the ECB today (highlights mine):
(Bond yields across Europe continue their collapse - hardly US$ bearish)
At today’s meeting the Governing Council of the European Central Bank (ECB) decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels at least through the first half of 2020, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to its aim over the medium term.
The Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
The Governing Council also underlined the need for a highly accommodative stance of monetary policy for a prolonged period of time, as inflation rates, both realised and projected, have been persistently below levels that are in line with its aim. Accordingly, if the medium-term inflation outlook continues to fall short of its aim, the Governing Council is determined to act, in line with its commitment to symmetry in the inflation aim. It therefore stands ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner.
In this context, the Governing Council has tasked the relevant Eurosystem Committees with examining options, including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.
i've never seen so many references to the hotel california as in discussions of zirp and nirp.
debt levels are so high that the global economy can't take interest rates much above, or even at, zero.
we can check out, but we can never leave UNTIL WE GENERATE SIGNIFICANT INFLATION. we're not there yet.
i've never seen so many references to the hotel california as in discussions of zirp and nirp.
debt levels are so high that the global economy can't take interest rates much above, or even at, zero.
we can check out, but we can never leave UNTIL WE GENERATE SIGNIFICANT INFLATION. we're not there yet.
Lower interest rates will only generate speculation in real estate, bitcoin, etc, asset bubble, and create more debt. There's no way it can generate consumer price inflation.
Lower interest rates will only generate speculation in real estate, bitcoin, etc, asset bubble, and create more debt. There's no way it can generate consumer price inflation.
the rates themselves will not generate inflation. they are a symptom of the need for inflation, and a harbinger of the essentially unfundable enormous fiscal spending to come. that is what will generate inflation.
the rates themselves will not generate inflation. they are a symptom of the need for inflation, and a harbinger of the essentially unfundable enormous fiscal spending to come. that is what will generate inflation.
Odd thing I've contemplated in recent years is why not more deflation? One industry after the next was shipped overseas to where factory workers in factory dorms ear factory scrip and basically work for nothing. And the prices of goods they build predictably has dropped a lot. But every time finance, insurance, real estate, healthcare, and education costs have risen to balance the equation. For every manufacturing job lost in America, we gained a healthcare job. Before the boomers hit hospice en masse. So in the end of the day, between that, inequality, and downward pressure on wages, the quality of life for most people deteriorated despite plunging prices. There are weird second order effects. My guess is a huge part of the crime drop is that nothing is worth anything now. TV isn't even a week of work at minimum wage. Car radio is less. There's nothing worth stealing, since a TV is worth less than a week of rent on a one bed apartment or a week of health insurance premiums. So some things inflate despite the drop in chattel prices. But how do you possibly get massive inflation when chattels are worthless and rents and premiums are so outrageously expensive?
It seems to me FIRE prices expand to consume all available disposable income. So without wage hikes, and without even cheaper labor inputs for chattels, they're constrained. And I've already gone over how wages won't go up without big changes. I'm straining to see how the inflation comes about, even with insane fiscal deficits. You could print a hundred trillions right now, and what would happen? It won't trickle down. It never does. Maybe inflation in luxury assets and investment bubbles, but we already see that. Consumption won't budge In a major way. Because wages won't budge.
Unless the fiscal deficits are shunting money down to the bottom 90% directly, it's pushing on a string.
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