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  1. #11426
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    Quote Originally Posted by the propagandist formerly monikered brostoyevski View Post
    Largest single buyer of USTs is the Fed on behalf of the Treasury. So the bond market can't snap if it's being monetized by the brrrrr macheen.
    That's only part of it. I'm talking about the foreigners and pension funds, etc., half of which are broke.
    "timberridge is terminally vapid" -- a fortune cookie in Yueyang

  2. #11427
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    Quote Originally Posted by Timberridge View Post
    That's only part of it. I'm talking about the foreigners and pension funds, etc., half of which are broke.
    But those USTs are have gained in value and are primed to explode even higher according to some. So they aren't broke. Or they are, which is it?

  3. #11428
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    Quote Originally Posted by Benny Profane View Post
    You're not getting it. We're living through a grand experiment. Modern monetary theory 1.0. Just print money. Unfortunately the inflationistas and debt moaners have started to whine the past few weeks. Didn't we learn anything in '08?
    Yeah, the lesson from '08 was that money was too tight.

    "Restrictive monetary policy rather than the deleveraging in financial markets that had begun in August 2007 offers a more direct explanation of the intensification of the recession that began in the summer of 2008. By then, U.S. financial markets were reasonably calm. The intensification of the recession began before the financial turmoil that followed the September 15, 2008, Lehman bankruptcy. Although from mid-2007 through mid-December 2008, financial institutions reported losses of $1 trillion dollars, they also raised $930 billion in capital–$346 billion from governments and $585 billion from the private sector"

    In other words, the “audit the Fed” gold bug money machine QE brrrrr hyperinflation narrative is wrong. The Fed did too little, not too much.


    Once again the bigger 2020 risk is deflation, not inflation. Seeing something like 2% inflation by '21-22 would be a good thing and the Fed should do whatever it takes to make that happen.

    And FWIW MMT is a bullshit economic model, not a monetary policy.

    The bottom line is the Fed can't fix any of our problems because peoples’ perceptions of safety means only saving lives will save the economy. What the Fed can do is inject excess cash into the economy which people will then spend when it's safe to do so.

    https://www.richmondfed.org/-/media/...df/hetzel2.pdf

  4. #11429
    Foreigners have been net sellers of USTs for some time now. International repo facility, foreign CB swap lines & OMO are there to absorb any acceleration in foreign UST sales. For now the program is to accumulate USTs via OMO while offering 'extend & pretend' liquidity via repo/swap.

    Pension fund selling is a mayor issue true, though idk why they'd sell USTs as opposed to more business-risk sensitive stuff like stonks.

    Quote Originally Posted by MultiVerse View Post
    Yeah, the lesson from '08 was that money was too tight.
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  5. #11430
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    ^ MV = PQ or MV = Nominal GDP. Gold bug BTC homers never understand velocity (V).

  6. #11431
    Quote Originally Posted by MultiVerse View Post
    ^ MV = PQ
    So an organization that is literally owned by banks, who got destroyed in 2008 on the back of stupidity and fraud, feels that it should have been more accommodative towards said banks prior to the moment at which their bad decisions came to light.

    This is penetrating analysis Multiverse. Thank you.

  7. #11432
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    No, you're missing the point and instead resorting to demagoguery.

    As a result of restrictive monetary policy the U.S. economy weakened steadily *before the financial turmoil* throughout 2008 with an annualized real GDP growth of −.5% creating expectations among the public that the fall in equity and housing wealth would be permanent.

    In other words, the Fed messed up when it intervened in credit markets and instead the Fed should have adopted more accommodative monetary policy.

  8. #11433
    An illustration of the restrictive monetary policy in 2008. Fed chased yields down, like they always do.


    Click image for larger version. 

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  9. #11434
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    Without context your chart means nothing and that's why you should never reason from a price change. Once again MV = NGDP.

    In other other words, Nominal GDP tells you whether monetary policy is restrictive or accommodative.

    For all the talk of money machine goes brrrrrr, where's the post '08 inflation?

  10. #11435
    Same place it went in the inter-war period preceding the Great Depression, assets. Stocks & real estate alongside an epic bond binge. Sound familiar?

    FFR vs. 03MY with slope angles for explanation... the credit implosions of 08 and 20 were so dramatic and fast that they overwhelmed the capabilities of policy makers. Slower onset of yield collapse allows more time for policy to adjust FFR. So you have the steepest yield curve collapses on record in 08 and now 20. It is an impossibility to sustain such over-financialized asset markets without real, non-financial growth to support valuations from the demand side. It's why velocity is so low, all new money is funneled into assets, which prices out salaried and hourly workers from things like RE, healthcare while a slice at the top is able to keep pace with the rampant asset inflation.

    This gets back to the fundamental problem of relying on a drug dealer for health tips. You're gonna have a bad time if you're unable to grasp the flagrant conflict of interests. Banks weren't held accountable for 2008 or current poor lending because they regulate themselves. Literally. NY Fed is managed by a consortium of banks. Look at their board of directors in 2007. Dick Fuld was on that board.

    Click image for larger version. 

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  11. #11436
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    Once again you're reasoning from a price change. We know from the real estate thread that there's lots of affordable housing in middle America.

    Restrictive zoning and high demand in hot markets cause housing prices to rise but as everyone points out you can always move someplace less expensive. If your narrative was true housing prices would have risen to bubble proportions everywhere.

    Also, easy money and easy credit are not the same thing. Better to think of '08 as a Minsky moment.


    P.S. If you take the long view yield curve prior the Great Depression it was inverted for most of the prior fifty years.
    Last edited by MultiVerse; 05-14-2020 at 10:21 AM.

  12. #11437
    They did in aggregate. Hopefully you're not assuming price change uniformity across markets, that's been debunked for about 250yrs now.

    Click image for larger version. 

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  13. #11438
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    Quote Originally Posted by MultiVerse View Post
    Without context your chart means nothing and that's why you should never reason from a price change. Once again MV = NGDP.

    In other other words, Nominal GDP tells you whether monetary policy is restrictive or accommodative.

    For all the talk of money machine goes brrrrrr, where's the post '08 inflation?
    It went into the housing and stock markets. And I guess that trickle down theory is now officially debunked.
    "We don't beat the reaper by living longer, we beat the reaper by living well and living fully." - Randy Pausch

  14. #11439
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    The question isn't whether housing and equity prices rose, that's reasoning from a price change, the question is what would real housing prices look like in a world without bubbles?

    Prices would look like they do now, what the Efficient Market Hypothesis (EMH) predicts, as a series of random increases and decreases roughly tracking Nominal GDP.

    Unaffordable housing is a real problem. People like Bro migrated to hot cities like SLC because they wanted to. Others did so because of jobs.

    If uncool cities like Detroit suddenly created 10,000s of thousands of jobs and Detroit also restricted supply then prices would rise there too.

  15. #11440
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    Quote Originally Posted by LeeLau View Post
    ACB is the 5s down approx 15% from the split so puts are in the money. Also shorted some in the TSE.
    I was curious about what happens if I buy puts before a reverse split; ie what happens after the reverse split? ACB did a 1 for 12 reverse split. I owned puts. The puts became an untradeable derivative but I could exercise them. So I did and they converted to post split shares therefore whoever was my counterparty had to accept my offer price for the post split shares at the option price (presumably the counterparty had to buy ACB on the open market). The profits simply showed up in the account immediately which was nice as I thought it would take 3 days or so for clearings and settlement.

  16. #11441
    TLT has essentially doubled since the 2009-2012 lows, as another data point on where the inflation has gone. It takes a few bucks to double the global long-dated bond market.

    All that money chasing bond yields & RE alchemy is societal capital that is not going towards new ideas & experimentation.

  17. #11442
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    Agreed, reliance on rising asset prices for prosperity is a bad thing.

    My point is there's often a tautological aspect to these arguments. The causation arrow *always* points to the Fed → rising asset prices, when instead rising asset prices also results from other things like prosperity, productivity, migration, etc.

    The most important point is demand for money is real and we should be looking at nominal growth forecasts (preferably decided by the market not the Fed) rather than worrying about hyperinflation.

  18. #11443
    If there is one thing I wish people would embrace, it's the idea that our productive capacity in USA today is so incredibly powerful that we don't need 40hr work weeks, rampant consumerism, and asset inflation to achieve prosperity. Allowing tech-led deflation to erode the cost of living without unnatural interference from monetary policy would at least compensate workers for things like factor price equalization & offshoring. And it would reverse the trend of screwing groups like teachers, public servants, services industry workers.

    I'm deeply bullish on the potential of tech & application of all these prior lessons learned. But equally bearish on the destructiveness of the incentive structures that the old economy was built on. The adaptability that is needed to adjust to the current environment cannot be realized with such a heavy corporatist hand controlling the path.

    Focus on direct subsidies to ensure food/shelter/access to information are there, this is cheap to do and minimizes pain & suffering. Let the rentiers in finance, govt and speculative concerns face the competition of an actual market. And rebuild a new economy for the 21st century like we should have done in 2009.

    Jeff Booth just put out a great book on this general narrative, The Price of Tomorrow

  19. #11444
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    A-fucking-men ^^^

  20. #11445
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    The new big tech corporatists are every bit as keen on amassing power and wealth. Indeed, they are better at it, and there's no enforcement of anti-trust laws to slow them down.

  21. #11446
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    Quote Originally Posted by LeeLau View Post
    I was curious about what happens if I buy puts before a reverse split; ie what happens after the reverse split? ACB did a 1 for 12 reverse split. I owned puts. The puts became an untradeable derivative but I could exercise them. So I did and they converted to post split shares therefore whoever was my counterparty had to accept my offer price for the post split shares at the option price (presumably the counterparty had to buy ACB on the open market). The profits simply showed up in the account immediately which was nice as I thought it would take 3 days or so for clearings and settlement.
    The money probably showed up in your account as “available for trade” but won’t actually “settle” until the second day after the trade.

    If you buy another stock with that “available for trade” money, that’s OK. But if you then sell the second stock before the first trade settles, you can cause a “good faith violation”. If you sell it after the first trade settles, you are OK.

    At least that’s how it works with Fidelity. Got bit by that recently.

  22. #11447
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    Recently did a rollover from my 401k to an IRA that I already had. Sick of end of day trading & pricing for the mutual funds which was all that my 401k permitted, and wanted to move to ETFs mostly and some small portion of stocks.

    So, I’m out of the market for about 5 days while that all settles out. Sitting on a pile of cash while the market, and especially, tech stocks go on a tear. So finally I pick Tuesday morning to get back in with some VTI & QQQ. Immediately afterwards stocks reverse and go into a nose dive. So I say to myself, why not buy the dips? So I do, and cost average down... for three days, and it looks like the slope is getting steeper. Who knows, this could be the big one, that Benny was predicting?

    So I pull the plug this morning to limit the loss. And you know the rest of that story. Stocks reverse right afterwards. I have no balls.
    Last edited by billyk; 05-14-2020 at 08:32 PM.

  23. #11448
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    Quote Originally Posted by Deebased View Post
    A-fucking-men ^^^
    I mean there's plenty of jobs if everybody only works half as much.

  24. #11449
    Quote Originally Posted by MultiVerse View Post
    The most important point is demand for money is real and we should be looking at nominal growth forecasts (preferably decided by the market not the Fed) rather than worrying about hyperinflation.
    I wonder how people can know "the Fed was too tight" in 2006/2007 when credit demand has been shown to have variable elasticity. Speculative character is the input that controls the degree of credit demand elasticity and as that's unknowable in any specific degree, how is a policy maker to know whether or not an FFR level is too tight or loose? The bigger epistemological question being, if impact of a given forward rate is unknowable in advance, of what use is a critique that claims a mistake was made?

    There's another branch where you could look at the implosion of certain portions of the credit markets (subprime 2006 collapse being a prime example) as the driver of a slackening demand for credit in 2007/2008/2009 that had nothing to do with FFR being 4, 5 or 3%.

    Which leaves me wondering, if the rule of ignoring price brings you to that kind of assumption, of what use is the logic? I just found the notion that 2008 was a product of tight money as incredibly obtuse, similar to blaming the 1930s depression on a rock.

    And your point about RE having to reach bubble proportions everywhere is dead wrong. That's uniformity of price change thinking, it's been clearly demonstrated that's not how price change works.

  25. #11450
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    The key point is the money supply is not a reliable measure of monetary policy. The evidence that the Fed was too tight is seen in the sharp drop in Nominal GDP (NGDP) leading to a sharp drop in Real GDP (GDP). Nominal GDP that is the combination of inflation and real growth, not inflation alone, not so called bubbles, not interest rates, is the leading indicator of money demand.


    The mistake is thinking the housing bubble caused the crises. Most of the decline in new housing construction occurred during a two year period prior to 2008 when the unemployment rate only ticked up a small amount. Or in other words, construction workers were able to find new jobs when the bubble actually deflated.

    It wasn't until late '08-09 when the financial crisis happened (which did have its origins in housing) that unemployment spiked but up until that point credit markets were capable of dealing with the problem.

    In late '08, however, stocks, commodities, bond yields, all plunged indicating expectations among investors for a sharp drop in nominal spending. Instead of thinking about bubbles, bailouts, fiscal stimulus and easy/tight money by instead focusing on aggregate spending or Nominal GDP monetary policy can help the private economy allocate resources to other sectors if, housing for example, declines.


    If you look at bubbles in terms of Nominal GDP growth then "bubbles" like '29, 2000, '06 occurred when NGDP growth was low and not when NGDP growth was stable. Instead of thinking of housing in terms of bubbles, you can assume EMH which means housing is a combination of durable goods and scarce resource. In that sense a “bubble” is really a sharp increase in the value of land.

    In that sense the housing boom of the 2000's was not a bubble. The bust of 2007-2009 was a Fed-imposed liquidity crisis:

    https://www.idiosyncraticwhisk.com/2...sing-boom.html

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