(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)Thanks for reading Crypto Trader Digest! Subscribe for free to receive new posts and support my work.
your writings are as entertaining as they are educational. gracias, amigo.
Damn!!!! Satoshi Disciple...intoxicating Cerebral Geisha Varietal
As much as I agree on your general view, there is a logical fallacy in your argumentation that the interest paid by the Treasury is stimulative and counteracting the FED's QT program. Every single dollar that is paid as interest must first be taken away from the market by issuing even more debt . It's not adding dollars, it's adding gov debt. It follows that, as QT is much bigger than RRP and IORB, the FED is actually removing dollars from the system, which imho is the only thing that keeps the dollar relatively strong for the time being.
I assume that between 2 types of inflation, QT would be most beneficial to TBTF banks and big money, which could influence the decisions of the Fed? Thoughts?
[Taking those three things together, we know that the net effect of US monetary policy is currently stimulative and the money printer is churning out more and more fiat toilet paper.]
I don’t think parking money in a money market account is as stimulative as the growth of the money supply through fractional reserve lending..which is what the fed is trying to slow down.
Arthur - you are a comedic devil that writes with deep experience and intelligence, we love what you do - your writings and most importantly your guidance. Thank you for all you do - the world is better for it.
Inspite of your love for the stinky fruit (which is graphically beautiful before someone unleashes it) I've read everyone of your essays for three years now :) And having lived in HK '95-'97, understand your love for it and enjoy the references. Thanks for educating Arthur. It's very much appreciated.
Wonderful article, insightful and well written. However, IMHO it underplays the impact of rising rates on The velocity of money and demand destruction in the ‘real economy’ . Another conclusion here could be that central banks are forced to keep raising rates until real pain and a collapse in velocity is apparent. I don’t see that as good for BTC or other ‘risk assets’.
"if the US Treasury tried to stuff the market with trillions of dollars worth of long-term debt, the market would demand a vastly higher yield. Imagine if the 30-year yield doubled from 3.5% to 7% – it would crater bond prices". Isn't the causality the other way around? To incentivise buying, newly issued bonds need lower prices and this would cause spiking yield.
Treasury does not mint fresh dollar but instead raises money from the market to pay for its interest. Wouldn't this draw money out from the market? As such, the interest paid by Treasury shouldn't be calculated within the quantity of money.
Another, timely, impactful, colorful(I gained greater insight as to the undergruding of the free stuff policy) and Masterfully done. Where does pension funds fall on the chart of HHN, SSA, DEFENSE, etc??
on the other hand money disappearing very quickly from economy.
Differential interest rates are out of question?
I mean, the Fed could set a low interest rate to the US Government deficits and other things it has to; but continue to increase the interest rates for borrowings.
It’s important to distinguish between countries that have significant liabilities denominated in an external currency vs those that don’t. It’s difficult to argue empirically that cutting rates causes inflation in the latter, but easy in the former. Very different choices and outcomes for both.
Rate hike inflationary classic Mosler MMT! This is crucial insight no one's talking about. This marks the key difference between 2011 -20% debt ceiling/TGA replenishment market wobble vs market chillaxing today. If this plays out without increasing vol yup 20k may never come. Serve me summer lull and dip buying. Nice.
Brilliant and excellent as always. Love your articles Arthur, always learn a lot. Thanks for the content