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The Root of the Petrodollar Error Is That There Is One

The Root of the Petrodollar Error Is That There Is One April 22, 2022

At root of the petrodollar error, that there is a petrodollar, is the very idea that governments monopolize money. You hear the claim repeated incessantly, a power, perhaps the power that authorities took on and will never, ever relinquish. Therefore...

Weird Doesn't Even Begin to Describe the Present

Weird Doesn't Even Begin to Describe the Present April 29, 2022

Weird doesn’t even begin to describe it. You are a hedge fund, let’s say, and your business is buying risky longer-term bonds leveraging a menu of short-term funding options. Typical maturity transformation stuff. To obtain the most efficient leverag...

It Isn't the Fed's Theater of Rate Hikes That Got Us Here

It Isn't the Fed's Theater of Rate Hikes That Got Us Here May 06, 2022

Repo gets all of what tiny little bit of attention the world might pay (pun intended) to collateral. It shouldn’t be the sole star of this deeper shadow money world. There are other segments on the inside which gobble up collateral use, some of which...

The Premium For Cash Is Presently Enormous

The Premium For Cash Is Presently Enormous May 13, 2022

The premium paid for cash had reached 4% over deposits, an unthinkably huge charge for liquidity. American economist Abram Piatt Andrew Jr. lamented how such a rate hadn’t walloped Britain once since the frightful Napoleonic Wars. France hadn’t witne...

Despite What You're Told, This Has Never Been Inflation

Despite What You're Told, This Has Never Been Inflation May 20, 2022

These are the words never to be uttered. Not if you know what is good for you. They have nothing to do with national security. No secret formulas locked tightly away from prying eyes. A taboo imposed by strict observance with the codes of positive me...

Let's Get Ready To Clean Up More of Powell and Yellen's Mess

Let's Get Ready To Clean Up More of Powell and Yellen's Mess May 27, 2022

Feces and fans. Never a good combination for anyone who happens to be near the spinning blades, basic logic and common sense dictate the only way to achieve a positive resolution is to stop the flung excreta from reaching its destination in the first...

Monetary Policy Is All Talk All the Time, and Always Has Been

Monetary Policy Is All Talk All the Time, and Always Has Been June 03, 2022

The situation in February 1981 was unexpected, which had simply become the norm. Oil prices from 1979 had put the US economy into a tailspin by the first half of 1980, a development which caught economists, politicians, and policymakers all off-guard...

CPIs Aren't the Economy, and They're Not Inflation

CPIs Aren't the Economy, and They're Not Inflation June 10, 2022

Warned more than six months ago it was all starting to seriously go awry, the steady stream of increasingly dire messages went unheeded. The eurodollar futures curve first inverted way back on December 1, though hardly anyone noticed (or had any idea...

A Case for Deflation As the Cause of Our Malaise

A Case for Deflation As the Cause of Our Malaise June 17, 2022

A popular catchphrase from the once-popular Game Of Thrones was “winter is coming.” Set in the fantasy world of the HBO drama, winters weren’t seasonal in the way we experience them on our Earth. Cold, yes, but prolonged in every respect. Once the te...

You Won't Find Inflation Anywhere But In the CPI

You Won't Find Inflation Anywhere But In the CPI June 24, 2022

The word “supercycle” was nearly as overused as inflation has been. In fact, the two very much related; the latter the major thesis behind the former. History shows that given prospects for doomed fiat currencies the only shelter is the realm of the ...

The Treasury Curve Will Still Guide You Toward Useful Truth

The Treasury Curve Will Still Guide You Toward Useful Truth July 08, 2022

We’ve been fooled into believing there is no longer a monetary Pole Star by which to accurately triangulate our current financial position. Speaking in terms of money, finance, and economy, in the olden days of a fixed currency getting your bearings ...

Since When Does the Fed Funds Rate Have Anything To Do With Anything?

Since When Does the Fed Funds Rate Have Anything To Do With Anything? July 15, 2022

The chaotic global breakdown of March 2020 did a lot of things, including adding more unnecessary pressure to an already-reeling pandemic-shocked world. Authorities have spent the balance of the more than two years since doing two things: puzzling ov...

A European Rate Hike Is the Global Economy's Kiss of Death

A European Rate Hike Is the Global Economy's Kiss of Death July 22, 2022

At first, they really thought the price pressures would be transitory. After some reconsideration, they changed their collective minds. Oil markets were rampaging, seemingly nothing to stop them, creating “inflation” headwinds that couldn’t be so eas...

Why Does the Fed Spend So Little Time On the Past?

Why Does the Fed Spend So Little Time On the Past? July 29, 2022

There is something about repo which repels mainstream curiosity. It’s more than weird, how throughout their long history repurchase agreements have gone so studiously overlooked. It has to be intentional. The real irony is that the Federal Reserve it...

What's Lacking Right Now Is the Fed's Will To Act

What's Lacking Right Now Is the Fed's Will To Act August 05, 2022

The Financial Crisis Inquiry Commission (FCIC) was empaneled to have the final say on the 2008 panic. A political affair though not necessarily partisan, its true purpose was to get the public to stop talking about the disaster by appearing thorough,...

Whose Interests Do Central Bankers and Economists Serve?

Whose Interests Do Central Bankers and Economists Serve? August 12, 2022

Adam Smith was sufficiently brilliant to simply call it the invisible hand and leave it alone. How does individual business make the miraculous seem ordinary enough to be taken for granted? On a microscale, that’s for them to know and macroanalysis t...

There's Much That Ails Us Today, But It's Not Inflation

There's Much That Ails Us Today, But It's Not Inflation August 19, 2022

It remains one of those instances when you see something for the first time, truly take in the thing, you can never unsee it. Explanations for the seventies Great Inflation to this day are lacking and inconsistent. The venerable Allan H. Meltzer’s wo...

Kicking and Screaming Into Deflationary Seas

Kicking and Screaming Into Deflationary Seas August 26, 2022

In nearly every questionable case, when a politician like a central banker tells you that the economy is doing just swell, you’re safe to assume you’ve been lied to. Part of this is what modern “monetary” policy actually is, which is psychological ma...

It's Not Just the Japanese Who Can't Afford to Wait for the Inevitable Truth

It's Not Just the Japanese Who Can't Afford to Wait for the Inevitable Truth September 02, 2022

For the last several years, the behavior of Japan’s yen against the US dollar is near perfectly correlated with the eight-week average of US$ repo fails. From the outside, which means the mainstream, this sounds like one of those nonsensical relation...

The Infatuation With Fanciful Stories of Fascinating Bank Reserves

The Infatuation With Fanciful Stories of Fascinating Bank Reserves September 09, 2022

Humans invent monsters as a way to cope with their own imperfect knowledge. Norse sailors traveling around the various seas observed a gigantic, long-legged creature and without any way to understand what it was concocted the Kraken. What is supersti...

The Planet Has a Eurodollar Problem, Not a Dollar Problem

The Planet Has a Eurodollar Problem, Not a Dollar Problem September 16, 2022

Hardly any of us know how an automobile actually provides locomotion. Sure, we understand fuel goes in it somewhere, combustion provides the required power, forcing the vehicle forward as efficiently as possible on its circle-shaped tires. That’s all...

Global Demand May Have Hit a Wall When Market Curves Did

Global Demand May Have Hit a Wall When Market Curves Did September 23, 2022

You would have thought him a prosecutor knee-deep rooting out corruption. The man detested the very possibility of anyone scheming under his nose. But Jean-Claude Trichet wasn’t some overtly aggressive DA targeting mafiosos, he was the ECB’s boss det...

A Combination of Xi Coincidences Spins Into a Narrative

A Combination of Xi Coincidences Spins Into a Narrative September 30, 2022

This isn’t the first time Xi Jinping was said to have disappeared unexpectedly. And it isn’t the first time Xi was unaccounted for in the weeks leading up to a crucial Communist Party Congress. China’s entire government and political calendar revolve...

Only a Little of What's Said Is Anywhere Close To Accurate

Only a Little of What's Said Is Anywhere Close To Accurate October 07, 2022

Talk about whiplash. Having waited over three decades to restore inflation to its economy, the Bank of Japan is now concerned there’s too much. Maybe way too much. If so, was the twenty-sixth time really the charm? That’s how many QE versions have be...

Tons of Bank Reserves, Little Capacity To Do Anything

Tons of Bank Reserves, Little Capacity To Do Anything October 14, 2022

Long before too big to fail became a thing, Citigroup and the Federal Reserve often worked together. Traders at the bank would quite often talk and exchange action advice with their ostensibly regulatory overlords. Chummy, sure, but also a necessary ...

QE Amounts to Involuntary Tightening By Central Banks

QE Amounts to Involuntary Tightening By Central Banks October 21, 2022

Though they never come out and say it, the growing body of evidence shows that what’s called quantitative easing (QE) is more akin to involuntary or inadvertent tightening. The implications are enormous, though still largely unexplored if not entirel...

The Real Antagonists Are Those Doing the Same Things Over and Over

The Real Antagonists Are Those Doing the Same Things Over and Over October 28, 2022

It was the sort of man-to-man appeal no political official wants to make, especially for someone in a position of great authority during exceptionally trying times. Jean-Claude Trichet was the head of the European Central Bank and after having surviv...

Jerome Powell Should 'Get It,' But Maybe I'm Being Obtuse

Jerome Powell Should 'Get It,' But Maybe I'm Being Obtuse November 04, 2022

A wise man once warned that you never bite the hand which feeds you. That man was Jerome Powell. Seriously. Long before he set foot in the Federal Reserve, thirty years ago the future central banker was an actual banker (as a lawyer, still) who then ...

Progress For Jerome Powell, But What About Everyone Else?

Progress For Jerome Powell, But What About Everyone Else? November 11, 2022

The inability to learn from mistakes, including the most enormous and consequential errors, is the stuff of long-term decay. And while it is nothing new, there’s no comfort in such stark human reality. While we think of scientific progress as a stead...

So Much Trouble For So Little Yield at the Fed

So Much Trouble For So Little Yield at the Fed November 18, 2022

Before even getting to the details, it begs the question, why go to all this trouble? So much effort for so little yield, figuratively and literally. For policymakers at the Fed, their job really should be simple, robotic, even. Supply enough money t...

Recession Is the Most Obvious Answer To All the Inversion

Recession Is the Most Obvious Answer To All the Inversion December 02, 2022

As I type, the eurodollar futures curve is exactly 200 bps inverted, solidly Holy Crap territory. US Treasuries aren’t far behind in terms of historical upset, while an unprecedented inversion in the market for Germany’s government debt gets more unp...

New Urgency In the Marketplace Lacks Meaning to Monetary Officials

New Urgency In the Marketplace Lacks Meaning to Monetary Officials December 09, 2022

It’s been amazing to watch SOFR do in real-time what its detractors had warned about the entire time. The Federal Reserve through its various means pushed the private market to adopt this thing after having demonized LIBOR for going on a decade. Why?...

Recessions Hidden Behind Obvious Biases, Outdated Dogma

Recessions Hidden Behind Obvious Biases, Outdated Dogma December 16, 2022

Recessions are never unexpected, merely hidden behind obvious biases or buried under layers of outdated dogma. Most of the time, any economy is almost certainly expanding, which distorts our sense of probabilities. Since outright contractions seem ra...

We've Been On a Digital Money Standard For at Least Half a Century

We've Been On a Digital Money Standard For at Least Half a Century January 06, 2023

Just as the Federal Reserve is not a central bank, VISA is not actually a credit card company. What is it about money and payments which leads to so many of these things being labeled as what they aren’t? The answer, quite simply, is in the human ing...

No Need To Wait For a Crisis To Confirm What We Already Know

No Need To Wait For a Crisis To Confirm What We Already Know January 13, 2023

It seems like an unnecessarily inefficient method, maybe even a total waste (pun intended) of time trying to discern what an animal eats solely by observing what comes out its back end. You might eventually witness something useful at some point, tho...

Much Like Twenty Novembers Ago, We're At the Edge of a Cliff

Much Like Twenty Novembers Ago, We're At the Edge of a Cliff January 20, 2023

When staring directly at the edge of a cliff, you quite naturally begin to explore all the ways in which you might avoid going over it. The closer you get, obviously the more urgent the inquiry. And that’s exactly where we find our collected selves y...

Dollar Providers Biding Time, Betting On Collapse

Dollar Providers Biding Time, Betting On Collapse January 27, 2023

Among the earliest participants in the eurodollar system were Canadians. Though these dollars were floating around Europe, primarily, Canadian banks stood ready to borrow in bulk as needed. Not for their own purposes, the trade contributions therefor...

Central Bankers Fail Upward, But We Suffer Their Failings

Central Bankers Fail Upward, But We Suffer Their Failings February 03, 2023

Here it begins, an unofficial start to what will shortly be the mass official exodus from inflation-fighting first transiting through bewilderment before eventually settling in their usual climate of panic. It is as regular as any natural cycle, such...

In This 'Silent Depression,' Let's Destroy the Dollar All Over Again

In This 'Silent Depression,' Let's Destroy the Dollar All Over Again February 10, 2023

If you’ve been on the website nerdwallet.com, there truly is a lot of good and interesting stuff there. From helping you compare credit card offers to researching banks and their lending options, it even has useful information to explore insurance co...

Do QEs Fix Any Economy? The Question Is Rhetorical

Do QEs Fix Any Economy? The Question Is Rhetorical February 17, 2023

They come in with a tremendous bang, then go out with barely a whimper, and leave us in the very same jam that kicked off the cycle. Having since completely squandered rather than simply losing an entire decade, we must first remember Haruhiko Kuroda...

The Very Serious Possibility Recession Has Already Happened

The Very Serious Possibility Recession Has Already Happened February 24, 2023

It was a sudden and epic flood of oil the likes of which the country hadn’t seen before. According to the government’s numbers, the Energy Information Administration, over a seven-week period domestic stocks of crude gushed by a then-record 34.4 mill...

The Irrationality That Forms the Beliefs of Janet Yellen

The Irrationality That Forms the Beliefs of Janet Yellen March 03, 2023

I’m inclined to cut Treasury Secretary Janet Yellen a tiny little slack here, pun intended. Rather miffed by all this talk of recession, appearing on ABC’s Good Morning America the Monday following the release of the gigantic January jobs report, Yel...

Prices Point In Unison To a Dark Global Experience

Prices Point In Unison To a Dark Global Experience March 10, 2023

Have you ever noticed that whenever the US dollar’s exchange value goes up, nothing good comes from it? The simplest, most obvious correlation to make yet it has taken a decade and half for some Economists to start putting two and two together. For ...

Markets Have Been Warning Us About SVB for Months

Markets Have Been Warning Us About SVB for Months March 17, 2023

Can’t say we weren’t warned. Money and bond curves have been screaming for months trouble was lurking. A decent bout of it had erupted last fall, though hardly anyone saw it for what it was. Something about the UK, a bit of dollar activity in Switzer...

The Question No One Will Ask Jerome Powell: "What Would You Say You Do Here?"

The Question No One Will Ask Jerome Powell: "What Would You Say You Do Here?" March 31, 2023

It’s such an amazing scene from a true cult classic that it hasn’t just become an internet meme, the very image of the Bobs grilling sweaty, fear-ridden Tom Smykowski trying desperately to justify his employment at Initech has become its own hierogly...

March FOMC Minutes Reinforce How Bad They Are at Money

March FOMC Minutes Reinforce How Bad They Are at Money April 14, 2023

The other side of the supply shock was always going to be rough. Our only question was just how bad it might get. On that there were two variables, neither of those inflation. From the monetary side, we’d know from the beginning what ailed the global...

The Fed Goes Back to Fighting Non-Existent Inflation

The Fed Goes Back to Fighting Non-Existent Inflation April 21, 2023

In the months before the debt ceiling was reached and possibly breached in 2011, global markets just could not get enough of Treasury’s bills. Not the ones the Department might use to make payments, of course, rather the debt instruments which rest u...

Safety and Liquidity Will Soon Be Prized Even More

Safety and Liquidity Will Soon Be Prized Even More April 28, 2023

It has not been a great week for central bankers, which is already saying something. By standards of recent developments, so long as a seven-day period goes by without major banking news, for them it would be considered a good one. Adding to the now-...

The Deflation Is Here, and It Wasn't the Rate Hikes

The Deflation Is Here, and It Wasn't the Rate Hikes May 05, 2023

Just a few months ago, Mohamed El-Erian was decrying a “paradox of financial conditions” as he called them. Writing in the Financial Times, El-Erian was speaking for quite a lot of establishment types, Economists mostly, who were perplexed by the mis...

Markets Continuously Project Lower Rates...Much Lower

Markets Continuously Project Lower Rates...Much Lower May 19, 2023

Several serious questions remain yet to be answered in the aftermath of recent bank failures. While politicians wrestle over who might be to blame, they’ll never come up with a useful answer anyway and far more important is what this will all do to a...