Grrr...Bonds and Money Bear (Money=M0)
@GraphFinancials
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Former head of research for a special sits/arb shop in New York. I founded a business of Document in Augmented Media you might be a user already, who knows.
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Thank you for reading until the end. I am not very used to threads, I hope it was not too boring.
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Quantiative tighening of large proportion has 2 problems. First it is the same thing has pushing bad debt into bankruptcies, second it makes the cost of borrowing for the Government rise a lot.
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The US
#Fed
is entering into a quasi fiscal deficit situation next year, where the cost of sterilization is higher than interest received.
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When the central bank cost of sterilization of reserves to prevent the behavior described above is HIGHER than the interests received, it is the beginning of the end because the Central Bank has to print the difference.
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Negative real rates are stimulative, during Weimar, corporations would buy hard assets and borrowing against it, as currency borrowed was better than free, they were getting paid to do the arbitrage.
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When the Central bank prints but economic actors repay debt, the printing is cancelled though (Japan see Richard Kook)
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An external shock, war, embargo, drought, can trigger a vicious circle where inflation expectations rise, making cost of capital higher, and hence cost of capital and productiong higher (John Fullarton).
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When rates fall, even with large printed money, cost of capital falls. This is deflationary.
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Inflation is when you have a lot of bad credit on Central Banks. Why? Central Banks can not default but they can go print to the moon. But what are the catalysts?
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Deflation is when you have a lot of bad credit on commercial banks. Why? commercial banks can not print money with a lot of defautl, their lending operations freeze, money market freeze, the whole economy stops, and prices plunge.
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Quick Thread. Inflation vs. Deflation made easy.
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When people need to reaffirm "the obvious" it means it's not obvious anymore.
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Grrr...Bonds and Money Bear (Money=M0) Retweeted
Kissinger: “We are at the edge of war with Russia and China on issues which we partly created, without any concept of how this is going to end or what it’s supposed to lead to.”
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I was waiting for "Hourrah inflation over" to short the bonds again. I think we are getting there, we have a short window to short bonds again.
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