Comments by "Curious Crow" (@CuriousCrow-mp4cx) on "Eurodollar University"
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And why not, when the banks are still not investing in the real economy? They're Debt-farming for speculation instead of productive investment,pretendinh everything's fine now despite passing on the burden onto taxpayers for their bailout, and impoverishing everyone but themselves? The global financial system was broken in 2008 because the banks and the securitisation industry were too greedy and too corrupt. And the whole global economy has been stagnating and more subject to crashes and volatility ever since, because speculation is quicker and easier, even though it does little for the real economy. And the pandemic just put the frosting on that cake. The only thing that has grown are asset bubbles. So the global economy is a basket case, because the financial sector is far too big, and too unstable to be effective, and it's producing wealth disparities that are undermining national economirs. A little history of finance would tell you how this ends. It doesn't end well. It never has. The irony is we are experiencing the same failures that contributed to the end of the Greek and Roman empires, and for the same reasons. And their financial systems were run in the same way as ours, the only difference being is technology allowed a global financial system to emerge to be rotten from the inside instead of regional ones.
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The fact that a closed economy heavily based on exports is buying USD and liquidating their UST holdings when their economic production is not just stagnating but declining, is a clear indication that China is suffering a USD shortage. Why? Because when their economy was growing strongly, they were being paid in USD, and had enough surplus USD to buy USTs. Now they don't. And why? They making far less USD on as their exports fall as the global economy slows, and that also pulls down the value of their internal currency...
It's a simple accounting equation, that any country who isn't the USA in the globalised financial system will have to negotiate, because USD is the major form of international money. And if you're a sovereign nation who needs liquidity - and China needs liquidity because most of its savings are locked up in illiquid assets like real estate and high-risk loans to keep their economic engine going - you have to turn to external sources of liquidity, and that means USD. So liquidating their own UST holdings to get more USD is their only option to get more liquidity.
We know they're is a liquidity shortage from just looking at what statistics it does report, and the news coming out of China. If you ignore all the geopolical-driven sensitivities, and turn to math, it all becomes obvious. China wants to grow economic capacity within, to reduce its reliance on exports, but it still needs imports. And to pay for those they still need to provide USD.
No drama required.
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Global Economic History tells a different story. Both gold and silver prices collapsed in Europe because of Supply exceeding demand. Musa Musa collapse the value of gold when he went on pilgrimage to Mecca. He spent or gave away so much gold as he travelled there, it's price fell. Likewise when the Spanish started selling the silver mined in their new Colonies in the Americas in Europe, it collapsed the price of silver. Finance and monetary economics are related, but they are different. Yet, they inform each other, and in this case, economics understanding that supply and demand shifts price applies to currencies based on precious metals as much as fiat currencies. Indeed, why did the reintroduction of the Gold Standard in Britain create an economic crisis in the early 1920's? Why? Because the value of Sterling was set too high against gold, and it did not have enough gold in its reserves to pay for imports, having used it to settle its war debts to the US. This is the reason why that Gold is untenable as the sole form of international money. Nobody wants a world where one has to compete for a limited supply of gold or silver in order to trade for imports. That's was a basis for global wars, and it still would be now. And the idea that precious metals are immune to price changes, which of course, is what inflation and deflation are, is untrue simply because of the effect of demand and supply is impossible to avoid when anything is traded.
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Peron was a fan of Franco, so he was no Marxist. And our universities are not breeding radicals on both left and right, our failing economic system is. And, it's imperfections are known. But, it's the failure of its winners to ameliorate them that is at fault. Humans are imperfect creatures, and what we create has flaws as a consequence of our limitations. But that isn't a problem if those shortcomings are addressed promptly. The fact that we're still discussing Marx's critique in the 21st century, speaks volumes. Our sloth in addressing those shortcomings Marx highlighted, reflects our short-sightedness. Solutions are possible, but currently ignored or kicked down the road, leaving room for the radicals to spring up like weeds. Wealth inequality is Capitalism's kryptonite. Fix that, and the radicals will disappear.
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Talking about Marxism and Socialism is identifying the sneeze as the problem, instead of the cold one has. Economics falls into the same trap by focusing on wealth maximisation without considering how it is to distributed amongst those that created the conditions for it to be achieved. By ignoring the fact that such a question exists, economics as predominantly practised, runs out of road as a guiding framework. It's impotence allows room for radical ideologies to take root on both the right and the left. Marxism, communism, socialism on the left, and Fascism on the right, are responses to the now-glaring contradictions and inadequacies of capitalism as practised, which are increasing, as wealth inequality - the failure of adequate distribution of income across the income distribution increases over time. Distribution is the bit of the real world economy modern Economics swerves, leaving populist politics to pick up the ball. That where we are right now. Marc's critique of capitalism is still relevant because it describes its problems. Whether or not Marx's perscriptions for addresing them are helpful, is not the biggest problem. It's whether his critique is valid or not, and that is a moral question. Wealth is fetishized, whilst children go to bed hungry in the wealthiest countries in the world in the 21st century. People are homeless, whilst being employed full-time, and the S & P goes to all time highs. And the more the winners try to persuade everyone everything is fine, the more they give space for radical ideologies. The book "Angrynomics" by Mark Blyth and Eric Lonegan describes the deficit and prescribes solutions that would head off at the pass the growing radicalisation. It's worth a read.
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The definition of Inflation is the rate of price increases in a defined period, expressed as a percentage. Inflation is a complex phenomenon that can be caused by internal monetary policy, or external supply shocks, or both at the same time. Normally measured in the aggregate by policymakers, the individual experience of inflation will vary according to what goods and services one buys. However, certain goods and services are non-discretionary, and their price inflation is felt directly or indirectly by everyone.
Disinflation is the inability of producers to increase prices because of a persistent decline in consumer demand. Why producers may want to increase prices is either fear or greed. The reason consumer demand can fall is fear.
Deflation is the percentage rate of inflation falling to zero or becoming negative. Deflation only comes when consumers restrict themselves only to necessary non-discretionary spending, and expect prices to fall for discretionary products and services. This normally happens after a period of Disinflation. Accordingly, this reduces margins for producers, who then pursue cost-cutting to survive. As labour is the largest expense for producers, both Deflation and Disinflation increase unemployment.
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So you didn't take note of the job data? Employers in the productive economy comprising of sectors like manufacturing and construction aren't hiring. Not only that, but the Gig Economy is acting as a soak for those laid-off or who have had their hours cut. People are getting 2 or 3 Gig Economy jobs instead of one full time job, which explains the exponential growth in part-time jobs. And furthermore, the growth in new jobs is still within the public sector, and those jobs are being paid for by the remaining Covid reserves, and it's predicted that money will run out in the new year. And remember, those coming across the border are destined for the jobs Americans don't want to do. They're mostly not competing for white collar jobs, or decent paying blue collar jobs. They're accessing the bottom of the ladder. So, isn't it time to acknowledge what large caps corporations said during their first quarter earnings call, when they announced beside their earning that they were planning lay-offs? If they're trimming their workforces, what do you think is happening on the lower rings of the ladder? Hint: hiring freezing, employee hoarding, hours cuts, and the less scrupulous employers are attempting into increase attrition of their workers by cancelling hybrid working arrangements. This is why until recently all the labour market indicators suggested the economy was hot, whilst consumer spending was shrinking fast. If workers who are being laid off, or having their hours cut, they're going to hustle for extra money from the Gig Economy. Or claim unemployment as a last resort, because finding full time work is difficult right now. Hence the contradictory signals of a 'hot' economy with disinflation and swan diving consumer spending at the same time. It's not so much that the Jolts data is misleading. Rather it's reflecting employers are fishing for the best candidates, but not taking the on immediately if at all. And it's the biggest companies doing this. Its very much like t
fine hairline cracks appearing in the economy as a signal worse is to follow. Probably sometime after the election. Things are bad for consumer spending right now, and winter is yet to arrive. Good luck everyone. We're gonna need it.
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Well it seems that's only true for Bank Credit, which is not to deny its critical importance. But, as Jeff states, the Shadow Banks lend to regulated banks, who then either lend it onwards, or engage in trades, like the Carry Trade, but it's a opaque process, which amplifies the danger involved to the global financial system. As is, collateral and dollar shortages are endemic, so this in turn raises the risk of a systemic failure. The Money Markets are unregulated lenders, and so the risk cannot be quantified by regulators. The regulated banks have been reined in so far, but to date the NBFIs remain free of capital requirements or insurance to cover potential losses. This is why the Yen Carry Trade unwinding sent tremors through the bond market last year. And Repo failures have been increasing in Q3 and Q4 in 2024. No-one knows where or when this UXB will blow. And that would probably finish the current iteration of the global intermediation network, which was patched up but not fixed in 2008. For regulators, the complete repair is regulation of the Non-Bank Financial Institutions like Money Markets. And that might not happen in the current context.
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Bears do poop in the woods because they know how, where, and when to get a good meal. In the Stock market? Not really, because the lemmings are buying stocks that are pumped up. Bears go to the options market, and buy puts once they know which firms are swimming naked. This is why the Stock market is the Small Casino and the Options Market is the Big Casino. and lemmings can't afford to go there. And it's the place to make money on the downside, which as the US economy is consumption driven and consumers are being tortured on the rack, there is plenty. I mean, why do you think Trump actually won? Because Harris did not address the elephants in the room, and he exploited voter's discontent. But if he ignores the fact that the cost of his proposed tarrifs would fall on American consumers already anorexic wallets, then the Horseshoe will come flying off, as the GOP will sit back and let him do it. Interesting times.
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It's not zero inflation at all. You can't have zero inflation because of two things: Fear and Greed. Yes, producers set prices, but their motivation is not to provide a charity, but to produce profit. And people like getting wealthy. But not even producers can control events. Everything was OK until globalisation broke down because of Fear and Greed in 2008. That greed led to the Eurodollar Offshore Capital Market getting bent out of shape, and becoming really risk adverse. The truth is Fear of being ripped off again means liquidity needs to pumped in to persuade Eurodollar lenders to lend. The trust is gone, and when ygat happens their a premium to pay, and the only people that can find that money to stop the global financial system seizing up is the US government. But who are they subsidising? U.S. Banks. Back in the 2000's it was expected that profits from banking would decline, and there would be some rationalisation, because the banking sector is too big. You have too many banks all chasing the same money, and what's worse is that the banks stopped investing in the real economy. They've moved over to speculation, asset bubbles, the Stock Market, and derivatives. And the non-bank financial institutions are going down the same route. Hoarding money kills economies, but... People like getting wealthy. Wealthy enough to buy the politicians, the media, and everything else that's supposed to protect the masses. And the Fed ireal mandate is to deflect attention from the things that are rotting the global financial system - Increasing wealth inequality, economic colonialism, and climate change. And what's worse is that the big kajhunas running the show know the way things are is not sustainable, but they won't admit it that. The Fed can't fix global supply chains, or geopolitical tensions, or climate change, and all of those are drivers of inflation external to the US. Elites will never admit they screwed us up good because of their own fear and greed. So the Fed has to be seen to tidying up the whoopsies left on the carpet. S OK unemployment has to go up, and inflation has to burn through, because there is less opportunity to fiddle the currency value to offset it, because the global economy is interlinked, and liquidity is in low supply. Frank Baum was right about the Fed being the Wizard of Oz, or as Jeff calls it, the Janitor.
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Jeff is speaking as a big perspective macreconomist. From that perspective, it's churn. But as a human being, he understands your question really well, but as his knowledge is his only asset, and as he can't rewrite the rules of the game, he's sticking to that. And I can't blame him for that. I dunno if you watched Succession, but there's a quote from Season 1 that has stayed with me. And it's something like, "America was created as a factory to turn suffering into gold." Historically, that is absolutely correct for the 16th Century, where Europe began colonising the world. And the American Dream was erected over bones of who suffered to create its foundation. But despite everything, the suffering of new people and new generations over time, always seeped into its fabric. The Dream was just that. A dream, not a guarantee, or a social contract. And that's a bitter pill to swallow. But it might be good medicine nevertheless. Why? Perhaps a stakeholder democracy might be better than one based on a failing meritocracy. One where we ensure everyone has the basics and if you make more you can keep as much as is possible. We support each other and we try not to be divided. We look after our communities, where we live and work, and we don't tolerate throwing each other under the bus,and we take money out of politics. But hey, that just might be a dream itself. But we don't know until we try.
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You are confusing two different things. When they inflation is down, they are talking in aggregate terms that the pace of price increases has fallen. Because it's being seen in the aggregate, prices for individual goods and services will vary in how they respond. You don't buy a car daily, so you won't notice if those prices aren't rising as fast, or are even falling. But, you will notice it in your grocery shopping and your insurance costs. And depending on what you buy, your personal inflation might not be slowing or falling. So, your mileage will vary, and so will everyone else's. Inflation are like rats and mice. You may not see them, but you know when and where they're in your house. Suppliers set prices, and perhaps only two things force them to raise prices and that's Fear or Greed. And when it shifts from greed to fear, and the fear gets strong enough that's when unemployment starts creeping up. Shrinkflation - smaller package sizes for the same price - is a strategy used by suppliers when they know the consumer can't pay higher prices. So... Fear has been getting stronger for a while. Don't expect to see net price falls in consumer non-discretionary spending until things get really dire. Before that prices for discretionary spending will come down in price as demand for them shrinks. So car sales are down, luxury spending is down, takeout food spending is down, along with air travel and holiday spending. It's starting to hit the well-heeled, so the signs are there, but don't expect too many bargains right now.
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Perhaps you shouldha'e bought an ETF that you didn't understand the underlying asset. A clue is in the name of the ETF - iShares 20+ treasuries. Do you understand how long-term treasuries provide a profit and to whom? Certainly not retail buyers, because they trade over the short-term and at most the medium term. Long-term treasuries - those whose maturity is 10 years or more - is for institutional lenders who use them to structure their long-term liabilities, like insurance companies, pension funds, and mutual funds, or long maturity trust funds. You as a retail investor, have shown in all your posts in this channel no knowledge of this. That's why $61bn went into TLT just last week. And it's not retail buyers going into TLT. And you show no knowledge of that. So, I suspect your client is at fault. You know nothing about the asset. You don't even understand the trading patterns, which are for an asset that will payoff over years down the line. That's why you're claiming fraud, when you, a mere pawn in the middle, are just following orders, right? Mr Van Metre's business has only one complaint, and an investigation takes 6 months, and he's still trading. No-one has shut his business down to date. I suggest you tell your client to wait until the decision has been made on their claim. If he has proof, and it's credible, then he will get his compensation. Until then, he innocent until proven guilty. Happy Holidays!
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No: Look at Gross Domestic Income (GDI), which is the money actually earned for the stuff produced in GDP. Its that what is available to pay wages, and returns for investors. GDP is an accounting estimated value of economic output; GDI is the money that is actually got for the goods and setvices. GDP should equal GDI, but as an estimate ahead of being paid, it often doesn't. GDI measures what's actually in the till to spend. Hence all the revisions of GDP, because it takes longer to get the GDI figure. Likewise, look up the Labor Share of GDP, which again is an estimate of how much economic output value is spent on paying workers. The US IRS doesnt have a real time payroll tracker yet, and relies on surveys so payroll data eventually has to revise this figure further down the line. And you might notice the slice of GDP paid to Labor as a percentage has been shrinking for decades. These statistics explain why America can grow Billionaires, faster than wages. And why Consumerism and financialisation may have to die as as ways to sustainably develop economies. Along with the old model and the expectations it created, there is a change coming, as American oligarchs try to deal with the mistakes they made over several decades. And its ordinary people who is footing the bill for that.
Magical Market Thinking - the real MMT you should be worried about - of the last 5 decades or so has had unforeseen consequences. Certain chickens are coming home to roost, because the US being the global Lender of Last Resort to keep the US dollar King of The Hill is becoming unsustainable for the US, mainly because it entails issuing debt. And they can't afford to do so anymore, because there is more competition, and financial institutions aren't immune to greed or folly. Why? Because they're made up of people. And rich people aren't public intellectuals or philosopher kings. They're people who are good at making money and hoarding it, but not much else. And that has economic, political, and social consequences for everyone else on the planet. Things are changing because of these. Like having toothache, there are only two ways to treat it - with anaesthetic or without. But it's still going to hurt some, because of correcting the greedy and the foolish amongst us. Such is Life.
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What use is blame when you don't take accountability for the absurdities you are choosing to believe and the atrocities you, and others commit on yourself and other people as a consequence? When will you stop, shed your shoulds, and come to terms with what is? Why do people come to a channel that is teaching how the global financial system has been arranged since the Post-World War II, looking for advice trading on the stock market? Then complain - often violently and resentfully - when they don't get that advice? How absurd can that misguided sense of entitlement be? Instead, of admitting they are in the wrong place, and that they don't know what they really need, they keep on looking for a one stop shop or a panacea to solve a problem so complex that it impacts everyone on the planet. And what's worse, a solution unsuited for their needs? As the solution is far beyond just trading in the stockmarket or any market to solve. Markets are not taps that if you jusr turn them in the right way, assets will flow into your bucket. Markets are human institutions that reflect the nature of humans, for both good or ill. They are complex, often operating with other institutions in contradictory ways, and produce results that are contradictory and has negative effects. Markets are not playgrounds. They are more like Roman Ampitheatres, where blood letting is the means to stave off social disorder, whilst sacrificing those who can't afford to be in the audience but end up in the circus. Jeff is describing the machinery behind the process, which if you can't afford his courses, is a pretty strong indicator it's not a tool you can use. . Instead, you could be looking elsewhere. And listening to advice people like Warren Buffet gave for engaging in the stock market, which was, K. I. S. S., by buying index funds, and start early, because the rug pulls won't give you carpet burns. You could be developing alternative streams of income and assets, because the value of a 9-to-5 job is being eroded over time, and you have to have skills people want to pay for, and those with the money to buy them becoming more restricted as time goes on. You also have to be honest with yourself about your priorities, because they always come with problems. If you aren't happy to deal those problems, you have to change your priorities. You have to be prepared to adapt and keep on adapting. Don't play in the water unless you are prepare to learn to swim, and to find the right people to teach you. Stop expecting to be rescued when you don't.
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Biden or Trump the outcome is the same. 2019 the recession was on its way before the pandemic, which was just yet another crash due to the instability caused by 2008. And because the global financial system broke then, any supply shock would hurt everybody. It doesn't matter who is in the White House in November, they're not writing the agenda. They're just the front an for a more powerful force influencing outcomes leading from the fact that greed, fear, and folly are driving the economy. The experiment started in the 1980s has failed, and the job of government is to clean up the mess left by the financiers and the corporations, which entails stopping anything that would harm the status quo. Biden is just doing his job. Yellen's on the clock, and so is Powell. Blame is pointless, because unwittingly we've been complicit in bringing on the problems. When real wage growth stalled, the unions were neutered and their place at the table was removed. And workers borrowed to maintain their lifestyles. That left only the government and the money men in charge. And Blue and Red work for the money men. Almost all money they're spending goes to them directly and indirectly, whilst the employees just get more debt. They resgaped your economy to serve their interests, not yours. And they're trying to hold onto their power and get more wealth so they can keep score. It's a small club and ordinary Americans ain't in it. They and their descendants will just have settle the bill.for the folly of their wealthy asset owners.
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Not necessarily. Inflation can be purely down to too much money in the system, but as most of it is Bank credit provided by banks making loans, and the banks aren't very many new loans, and are dumping loans off their books, where's the money coming from? There is not much credit to be had. So this is less about monetary policy, and more about supply issues due to offshore supply lines being more expensive, Services becoming more expensive due to demand and firms like insurers passing on increased costs to consumers. (climate change is real, bird flu killed poultry flocks that have to be replaced, and Healthcare costs can't shrink, sorry.) Interest rate hikes are performative, because they can't do anything about supply shocks, and hardly any of the "money printing" went directly to consumers. Most of it when to firms, and if that money had been lent to firms instead of being gifted, or taxed effectively, there wouldn't have been much inflation to think about.
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Hopium is the hidden drug when uncertainty rears it's ugly head. People hope that what goes round doesn't come around. And reality carries on regardless. One reality is that the American economy in growth is shaped like a K. Those at the top have enough to say, "Crisis? What crisis?" And the ones at the bottom can smell the smoke as their hopes get crisp in the heat. Economics by walking about - actually looking hard at the realities around you - will tell you more about the real state of your economy. Add that to any economists' analysis - which is an overview anyway - and you'll know what's happening. The fact that consumer confidence is still tanking, and unemployment is set to rise, that more workers are falling out of the unemployment stats than are finding new jobs, and that hiring is in ice, is Economist talk for "buckle up boys, it's going to be a bumpy ride for those needing jobs to get by" is a red flag. But it's not the same economy for those who live off the value of assets. The asset rich got a severe pinch last, but hell, there's nearly 5 years to go yet. Them getting pinched, when there's little value outside tech, means there's only Hopium between the reality of those who need a job, and those that don't.
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No, it's not the worse case scenario right now. Unemployment hasn't even hit 6%. That's the time the Fed goes into panic mode. Right now their butt cheeks are clenched because it's a presidential election year. If it wasn't, they and most mainstream economists would be chilling, because they thought they had done something worthwhile. But... As the inflation we were hit with was mostly a supply shock, nothing the Fed could do could fix that. And this is the problem. The Fed itself doesn't understand inflation fully. Inflation isn't always a monetary phenomenon. Supply shocks due to exogenous factors like supply shocks aren't influenced by interest rates. Why interest rates had to be hiked was that QE was pursued at too high a level for too long. That was the monetary bit of the problem. and then the pandemic supply shock once lockdowns were done ramped up inflation on top of that even further. But, the problem is that consumers didn't most of that QE money. The big winners were the owners and shareholders of the businesses in which that household QE money was very quickly spent during the pandemic. Moreover, those businesses also got nice handouts from the State too. So the asset wealthy got a huge wealth boost because of QE and stimulus money. Far more than consumers did. So when those profits began to be spent, what were they being spent on? Luxury goods and services and assets. Hence the stock market boom, house prices climbing and not experiencing falls, and the sales boost in overseas travel and luxury vehicles. When the Fed finally woke up to the hike in inflation, they went hard on hikes that hit those who hadn't caused the inflation. Interest rate increases benefitted who? The asset wealthy. The Fed is clueless.
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Er... Not really, sweetheart. Right after lock downs ended, everyone expected China to lead the world in the global recovery, but it couldn't. And the US couldn't do it either. But China's situation went downhill from there. Basically, China is channeling a swan - seemingly serene above the water, but below the waterline, it's legs are going 10 to the dozen. Bazookas and bond sales can't help when the fundamentals don't add up. And that was the illusion of wealth with the collapsing Housing Bubble, defaulting belt and road loans, the withdrawal of informal subsidies, and the reshoring trend, are problems that bring worsening conditions for China. The only comfort is that China is not alone.
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It depends what you mean by "investment advice." You can't give investment advice on YouTube. Only accredited financial advisors can do that legally. So, this information on this channel isn't really for someone dropping a hundred dollars a month into the stock market. This is for people who have enough money to invest in global capital markets. So, it might just be above your pay grade tbh. A minimum deposit into the Eurodollar market is about $1 million. So... perhaps this information isn't for you. But, it still has its uses because it's about the whole global financial system and how it really works, and how it impacts the value of the dollar, and how governments and central banks are passengers and not driving the bus. Offshore Capital is where the real wealth is, out of the reach of the tax man, and away from public scrutiny. And the Eurodollar markets are the interface between that space and the rest of the global economy. National governments and Central banks are struggling to reduce its impact on whst we call the real economy. So yes, the Eurodollar market may seem irrelevant, but it makes the stock market look like a kindergarten. And your tax dollars are going into it to service your government's debt. So if the stock market is the weather, the Eurodollar market dictates the economic climate by its sheer size alone. It where people who need dollars get them. It creates most of the dollars in the world by providing USD-denominated credit to us and foreign banks and non-bank financial institutions like hedge funds, pension funds, and insurance companies. More USD is created and destroyed in the Eurodollar market every year than what exists in the US domestic economy. And it's controlled by the banking sector, and not governments or the Fed. So this is a macroeconomic channel. It's not about personal finance or small scale investing. This is about who runs the world.
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That's not going to happen, because that's only a symptom and not the cause of the problem. The real cause of the problem is that USD is valued too high for the productivity of its economy, and that wealth inequality - the disparate distribution of asset wealth - is reducing the ability to cushion the blow of inflation hikes. You have a fantasy economy where it's supposed to be driven by consumers, but nobody wants to pay those employees in real terms so that they can actually save money. Real wage growth has fallen behind inflation for the last 4 decades, and to maintain their living standards those workers took out debt. So the great GDP figures are phooey. First the Assetless Income Constrained Working class Employees, got deep sixed, and now it's the turn of the middle classes to suffer while the Asset Wealthy hoover up most of the money, and spend very little on consumption. Rather, they keep buying more and more assets. It's the low or no asset owners who are seeing both their purchasing power and Net value being eroded, mainly because politicians listen to financiers, bankers, and other wealthy assets owners, rather than those who depend on a wage for survival. Accordingly, the economic system has been unwittingly arranged for the Asset Owners to get even more wealthier and everyone else to get priced out of asset markets. Inflation was the tide going out, so everyone could see who was swimming naked because of the absurd logic underlying Neoliberal economics for nearly the last 5 decades. And the chickens are coming home to roost. And it's was written about by an 18th century Economist called Richard Cantillon. And the problem is that nobody wants the gravy train to stop. But the impoverishment of both limited and non-asset owners and their government will not stop, until the wealthy asset owning junkies and are forced to go cold Turkey, and consumption is no longer driven by mostly consumer debt. Until employees wages match inflation, and the overgenerous flow of assets to the already asset wealthy the pandemic is recouped by taxing ithem, nothing will change, and your descendants will get poorer.
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Warren Buffet reads the newspapers as analysis for assessing investments, and Wall Street Traders read newspapers as another source of analysis. And that's assessing activity with open economies. So why not with China? There's nothing wrong with reading newspapers if you choose the right newspapers and magazines, especially when traditional sources are either scarce or manipulated. (That's why certain regimes keep journalists away from their conflicts, because they want to control the narrative.) And I finance credibility is important. The Latin root of the word Credit, is Latin for Trust or belief, and if the financial data coming out is rigged or absent, you act like a rodent and find information where you can. Even more so, when your audience aren't experts on the subject, and need accessible onboarding to understand why a particular foreign economy is worth paying attention to. Especially, where the goal is to make money when times are good or bad. Of course, the humble newspaper is only a starting point, but you have to start somewhere, right?
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Go to the top of the class. It worse because the mechanism for producing that USD is broken. The Economist Mark Blyth described the International financial system like computer hardware for moving capital around the world. How well it works depends on the quality of the code written to program it. And like any computer, GIGO applies. And human frailties like greed, ambition, and desire can influence that code. To coin a phrase: "What man proposes, his predelictions disposes." The crash of 2008 was devastating it proved that ignoring human folly - as the Neoliberal economists optimistically did - proved that self-regulation of markets was unrealistic. The leash was too loose, and a lot of people got badly bitten. And despite the efforts of central bankers everywhere, confidence in capital markets is weaker, because nobody trusts anybody anymore. In relying on the US to provide an unlimited flow of liquidity/collateral, it is creating instability. Without trust, the risk aversion makes capital more expensive, and during down profits. And in requiring financial institutions to load up their balance sheets with assets they can't make a profit on, it's putting more pressure on the whole global financial system. It no longer works as smoothly efficiently. That's costing everyone.
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The Debt Ceiling was introduced in 1917 supposedly to give Congress the power to establish a limit on the growth of US sovereign debt. In practice however, the debt ceiling has never fallen. So go figure. The pessimism about US sovereign debt is questionable, because the ability to service the debt is there, even after sustained QE. However, the burden isn't evenly spread across the population, because the ALICEs - the asset limited, income-constrained employees - are getting hit now, and their children's prospects are worsening too. However, it's Congress who has turned the Debt Ceiling into an elevator, because the process is a consequence of the political will of Congress. All what will happen is that the debt will be rolled over, and as the majority of UST purchasers are US citizens, corporations, or institutions, Uncle Sam's debt is inescapably most of the savings of Americans. So, nothing will be done to change the status quo, unless there is a revolution in American Political Economy. And that's quite unlikely, because, at least for now, nobody is grabbing their pitchforks. The overwhelming privilege of being the global reserve currency is that USD or it's safest proxy - US Treasuries - are always in demand at home or abroad. That's the economic reality, and Congress keeps it that way. The only people who aren't happy, are those who think government debt is the same as personal or business debt. It's not. Having access to USD or USTs is the lubrication that keeps the global financial system running as capital and collateral. When there aren't enough to meet demand, the whole world gets uncomfortable. And the crises we've been having come about because there not enough to meet demand. That's why securitisation was a game changer. But, it means there are bottlenecks building up right now, because the AI bubble has been pricked by the possibly realities of Trump's trade and tariff war. If Trump gets his way, let's say the horses will be spooked, because his plans are naturally inflationary, which is perceived by the financial markets as an issue, because despite all the money thrown at the banks, they're trying to complete a tightrope walk. It's just crazy, but it also means, whatever happens in the future, right now USD is still the king of the hill.
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Lol and Hayek wasn't an Economist? Please stop treating serious stuff like a football game. To say Hayek is right about everything is as false to believe that any body is 100% right about everything. What is really sad is that you haven't even read George DiMartino's paper, or you would have realised that mainstream economics as practiced is the dismal science, because it's really more like a religion, and that includes Hayek. Economics as a discipline isn't practised as a social science. It's practised as a social science trying to convince everyone else it's a "hard" science that can produce empirically tested and proven facts without experimentation. That's bunkum. Economics is about human behaviour around resource allocation. But mainstream economics ignores that. It tries to pretend that every one is objective,rational and that they don't suffer from greed or bias. Hayek sadly falls into that groupthink. And his thought was more ideological than empirical. Real Science is supposed to describe or predict reality, not prescribe it. And don't get me wrong. Mainstream economists of whatever school tend to suffer the same problem, because the discipline's founding thinkers were ideologues too, who were concerned with "shoulds" and "oughts" instead of "what is." And we are all ill-served by that, because it ignores human nature. It's why no economic school of thought has yet predicted major economic catastrophes like 1929 and 2008. That fact alone should make you a bit more sceptical about how economics is practiced. I'm not saying to ignore your values, but what I am saying is, that your values are not necessarily reflecting the reality of how economies are run in the real world. Indeed, the idea that markets can be self-regulating is proven to be dubious by the fact alone that we can't get rid of greed and folly as human traits. How seriously can you take any body of thought that ignores greed and folly? Isn't that kind of naive? And Neoliberal economics has failed because of those tendencies, because of naive ideological beliefs. So however much you like a set of beliefs, don't cling in to them too tightly until they have solidly proven their utility in the real world. Because Madame Reality is a real bitch who takes no prisoners when she's ignored. Just ask the UK about Brexit. The people who promoted that were Hayek ideologues too. And the free financial markets flipped them the bird, and the UK economy is still punch drunk from the beating Reality is still giving it. The same will happen to any untested theory. And economics is full of them. So, the heretics in economics need to be listened to, and thought deeply about because they're pointing out the Emperor is a bit naked. But the same can happen when they become the new Emperor.
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What caused the prices to increase? There's Supply-side inflation = egg supply down due to Bird Flu culls of egg-laying hens vs. Demand-side inflation, where too much money is chasing too few goods, for example, luxury goods, like Louis Vuitton luggage. Nobody goes hungry when it's Demand-side inflation, because it's inflation in Discretionary spending. But when it's Supply-side inflation, Non-discretionary spending has to fall, and people are eating porridge for dinner, instead of meat and 2 veg. And the consumption in the economy right now is being mostly done by the top 10% of the Income Distribution. That's not enough consumption to grow the economy. Why? Rich people don't spend all their income as workers and poor people do. Inflation measures the speed of price increases. But that doesn't matter if your wages and other income is keeping up with price increases. So cutting Interest Rates by the Fed doesn't change that relationship. What the Federal Funds Rate cut is doing is signalling to the Market that more lending is needed, but the Market can ignore that signal. Why? They may perceive that it's too risky to lend more at that time. So, unless your credit rating is stellar, you might not get a loan. And even if you do, it will cost more during such times. Anyone with limited or no assets will have experienced falling living standards since 2008. And now, the Wealth Transfer from those people to the Asset Wealthy is so acute, it's killing the job and growth creating parts of the economy. And the Asset Wealthy don't want to stop sucking up more money. It's crazy, but greed is crazy unless it's controlled. And the Fed can't do anything to control it. What's needed is not more 5ax cuts for the wealthy, but more tax increases on speculation, and more tax credits on productive investments in industry. Without that, the US economy is in trouble.
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Sorry, but that's not true. Petrodollasr are the payments in USD for oil. Oil pool producers markets other than other BRICS pay for that oil in USD. So where do OPEC+ put those USD? Straight into the Eurodollar Market, which is worth $12trn in market cap. So sorry, but you are putting the cart before the horse. BRICS+ whilst trading in gold between each other, has to use USD with everyone else. So they put that money into the Eurodollar Market, because it's returns are better than onshore banks. And it's liquidity is greater. So... Petrodollars aren't dead, they're still in the machine that is the global financial system. And, as oil production is falling in response to stagnating global trade, the BRICS countries are trying to diversify in part, but they can't move away from USD, because gold is not as liquid as USD. When Gold can be used in a McDonald's, then things might be different. But until then, USD Is still the global reserve currency that can be sent anywhere in the world in a matter of minutes. That's why you're still in a USD world, and are likely to be for a good while yet. After all, you can be sure all the BRICS+ countries are still holding dollars or US Treasuries. That's how China is paying for all the credit their throwing at their dysfunctional banking system, by selling them, probably to the Japanese. That's just how it is.
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Not true. The West has always traded with the Far East, and it's money would be moving with the merchants travelling from East to West and versa, and the Mediterranean was the region that allowed African commodities to reach the west. And if you looked at a globe how Spain's problems became everyone else's by the logistics of Trades in between markets and the knock on effects of the deflation of silver. Especially as some large commodity suppliers only took payment in Gold or silver like China.
Economic History seems not to inform investors, and so beliefs are thought to trump facts. If you understood NY even bigg traders like China who loved silver and gold, still had to resort to paper money, just like the goldsmiths in Europe. And until gold can travel around the world as fast as bank credits, it is no longer logical to consider it as money. Yes, you can sell it for money, but you can't use it without intermediate steps, costs time and money. And as international money it's lack of liquidity relative to other forms of money, and it's inability to allow national economies to manage inflation easily, makes it a has been as international money. We need to step away from national currencies as international money. And the technology is already there to do so, but the faith isn't. Nobody trusts anyone anymore, so there are few nations which would be prepared to deal in a currency that was open but not controlled by governments. But we haven't evolved to be the kind of world where that would happen.
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Aswath Damodaran just dropped a video entitled "Fed Up With Fed Talk? Central Banks And Interest Rates: Fairy Tales And Facts", where he lays out his data analysis of the impact of the Fed on interest rates and the S & P 500. He concludes:
"There is an ancient story about a rooster named Chanticleer. Chanticleer was anointed the ruler of the farmyard that he lived in, because the other barnyard animals believed that it was his crowing every morning that caused the sun to rise, and that without him, they would be destined for a lifetime of darkness. That belief came from the undeniable fact that every morning,
Chanticleer's crows coincided with sun rise and daylight. The story now takes a dark turn, when one day, Chanticleer sleeps in and the sun rises anyway,
revealing his absence of power.
¨ The Fed (and every other central bank) in my view is like Chanticleer, with investors endowing it with powers to set interest rates and drive stock prices,
since the Fed's actions and market movements seem synchronized.
¤ As with Chanticleer, the truth is that the Fed is acting in response to changes in markets rather than driving those actions, and it is thus more follower than leader.
¤ That said, there is the very real possibility that the Fed may start to believe its own hype, and that hubristic central bankers may decide that they set rates and drive stock markets, rather than the other way around."
He has a link to download his analysis, if anyone wants to look at his evidence. Aswath Damodaran teaches Financial Valuation at NYU Stern, and is an investor himself.
I remember Jeff when you made your case that the Fed is in reality a janitor attempting to clean up after the mess created by others, and cannot proactively prevent their mistakes. This video is just restating that view, and you are not alone in your view. You've been validated by an investor who knows how to value companies and invest wisely in the Stock Market.
Keep going. Ignore the bot farms and the naysayers.
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The Eurodollar markets are the global offshore market for USD capital. In capitalisation it's about 1.5 - 2 times bigger than the US domestic economy. It's no surprise that countries outside the US are following its financial sector cues, because as the major global reserve currency, everyone uses USD to finance their banking sectors. So when securitisation evolved in the US, those securities weren't just sold to US banks. They were sold and used as collateral in the Eurodollar Markets as well. So the risk contagion was global. Hence, the damage done by greedy and credulous US financial institutions in 2008 damaged the global financial system. It's broken it, as can be seen by the stagnation in the global economy since the GFC. And that interdependency was the product of the US-driven financial globalisation initiated by the US after World War II at the Bretton Woods Conference. But, it's arguable that becoming the global financial hegemon then was storing up issues for the US in the future. Being the major global reserve currency is a two-edged sword, because now your economy gets cheaper capital, but you have to supply the global demand for your currency. It's arguable that the US postwar policies were well-meaning but short-sighted, because it became a problem for the US economy thereafter to supply those USD.
it was then the currency was geopoliticised, and caused issues. The postwar boom in the US increased the demand for imports, increasing inflation in the US, to which the response was capital controls to control the amount of USD leaving the US. This had the knock-on effect of reducing the amount of USD available in the rest of the world. That caused problems for everyone else, as they needed USD to pay for their imports, from the US and elsewhere, as well as producing their exports. It was that problem that bought about the evolution of the Eurodollar market between British and continental European banks, lending offshore deposits in their vaults to governments and each other.
Demand for USD outstripped supply, and those banks in London and Europe made a huge profit. It came to the attention of US investment banks, who got around the Capital controls by setting up subsidiaries in London and Europe. Together with the Europeans they connived with governments to keep the trade unofficial and deregulated, which made them even more money, but also made the size of the market opaque to Uncle Sam. This probably contributed to him not taking it that seriously. So, since at least the Mid 20th century, the global economy has been interdependency because of reliance on USD to fund global trade.
Financial globalisation is barely on the radar of those discontented with globalisation. But it exists in the similarities and synchronicities between national economies. E.G. Every developed economy has a housing bubble; trade in debt both consumer and commercial has ballooned, all have embraced privatisation to a degree, and all has problems with wealth inequality, aka the slow death of the middle class and social mobility, etc. Indeed, the level of financialisation within their economies correlates strongly with the degree of their adherence to Neoliberal economic tenets. (It is no surprise the worst impacts are in countries that fully committed themselves to those economic beliefs. The more sceptical, the less corrosion in the economy for the ALICEs - Asset Limited, Income Constrained Employees.) So, bad ideas spread just like viruses, and the chances of recovery depend on national economic beliefs.
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Not really. The Bank of International Settlements has a database which tracks Credit owed to the non-financial sector, and credit owed by governments to the financial sector. Both these swamp the sums central banks deal with. And their balance sheets are central bank reserves, which is purely electronic money. The people who have the wealth is not the central banks, but the banks, non-bank financial institutions, and corporations, and their owners. Central Banks don't control money; the money markets control money. And money comes in 3 types. The smallest in value are Central Bank Reserves, which are only about 3% of the total, then there's Currency aka Cash, which is only about 3 percent of the total, the other 95% is Bank Credit, money that is created by banks, and appears in the ledgers of each bank. This is created by the issuing of loans, and is destroyed when loans are repaid. That's the biggest and most valuable form of money in the world. The Eurodollar Market is the global unregulated wholesale money market, where once banks have run out of deposits to lend out, they go to borrow cheaper capital to make more loans. This is why Debt is the most important financial asset, and why the Global financial system runs on credit. But there's a problem. Money is about trust, and when trust is broken, financial systems stop working efficiently. That's why there are more crises, because there is a perennial shortage of trusted collateral for the loans needed to keep the global financial engine running. Nobody trusts each other anymore since 2008. and so the cost of money should be going up, if governments had let the greedy banks suck up the mess which they created. Instead, governments bailed out the banks, and the cost was placed on tax peers with the promise that their money would regain its value. But, that hasn't happened because the banks are still broken, and theirs not enough collateral to finance the real economy - the one that provides jobs. Instead the banks are funding speculation like crypto, and other asset bubbles. And the illusion of telephone number house prices disguised the issues, the forever climbing stock market, and the Ponzi scheme that is crypto is go up in price, that is assets, but the price of labour is surpressed to encourage works to subsidise their lifestyles with debt. So, central banks are just MCs, not the band who is playing the music, while your life gets harder as your purchasing power goes down. Why? The people who own all the debt and all the securities, and assets are the only ones getting rich. The Central banks are the public face of each country's cabal of plutocrats. The banks are parasites, because debt and speculation chases out productive investment. Debt is sucking the life out of the economy. And if you read some financial history, you would realise that the control of money and debt has been at the centre of a struggle between rulers vs oligarchs and plutocrats throughout the history of finance. It destroyed Greece and Rome, and unless someone, somehow bites the bullet and call a mulligan, it's not going to get better. And if you're an American, both parties know that this is a problem, but the asset owners are in charge because they can fund politicians to do their bidding. So Jay Powell is a messenger boy to the public, to keep them calm, and the Fed follows the credit market, rather than lead it any where. And the Eurodollar Market is controlled by the dealer banks. And there are people who know this, and Jeff is one of them. Michael Hudson is writing a trilogy on the history of debt, and David McWilliams has just written a popular history of money, called "Money". And there are academics now who realise we're just the modern version of the late Roman empire financially. It can be fixed, but the wealthy don't want to give up their power. So, again, perhaps through tariffs, you and everyone else who isn't isn't asset wealthy, are paying the price for that.
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So but this is just AI generated filler. This is not business history. This is financial, economic and political history in the making. All throughout economic history, which is far better known than financial history, trade has need to be financed. Transporting commodities takes time effort, and money. So this crisis is about money, not business. Specifically about how global trade is financed. And international money has become more complex as trade has expanded with the assistance of technology to span the world. And that has not been a smooth or easy path, because the desire for wealth and power creates distrust, and money is trust-based. The Eurodollar system evolved to meet a financial need, but as history shows us, banks fail because of human failings both the bankers and their customers. And states often cannot prevent that happening. Folly is part of the human condition. And until an alternative can be found to replace the Eurocurrency markets, the world is stuck with them. And it doesn't matter which national currency is involved. John Maynard Keynes proposed the Bancor, a non-sovereign international currency after World War II as a means to prevent future currency-based rivalry. It's a shame that his scheme was never taken up. If it had been, perhaps there would have been no need for Eurocurrency, because nobody would control the Bancor. And perhaps the world would have been better off.
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