Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski, Head of Obscure Movie References. Artwork by David Parkins.
[Emil’s Summary] We implicitly assume monetization of debt by central banks is inflationary. But inflation depends on the broader context. Is the economy healthy? Or is there an economic depression? Also, after an unprecedented three consecutive months of deflation in core consumer prices, June delivered weak inflation. Along with the dollar and unemployment it suggests economic weakness. And lastly, both the US Treasury General Account and Federal Reserve balance sheet are exploding in size. If either was central to money supply the US dollar would fall in value. But they aren’t and it isn’t; not really.
Episode 18, Part 1
00:37 | Yield curve control / ceilings / caps are needed if markets reject US Treasuries; that’s not the case, precisely the opposite.
07:00 | Did the Fed monetize US debt? Does monetizing debt lead to inflation? How did it work in the 1940s in the US?
11:37 | In March 2020 market participants were simultaneously selling US Treasury bonds and desperately buying US Treasury bills; odd.
14:34 | What does it take to create inflation when a central bank monetizes debt?
17:31 | Core consumer price inflation recently contracted for three consecutive months, a first for the data series.
20:28 | Which inflation do economists care about? Monetary inflation (too much money, chasing too few goods) or the cost of living?
23:33 | Headline and flexible price measures of inflation also signal deflation, not biblical monetary floods.
26:54 | The US dollar and unemployment claims are ‘less bad’ and corroborate an economy reoppened, not fixed.
29:24 | Economic accounts and monetary measures hint at reprieve, not resolution or rehabilitation let alone recovery.
32:14 | If Jay Powell was ‘printing’ then dollar’s value should be inversely related to the Federal Reserve’s balance sheet; it’s not.
35:21 | The dollar has begun to fall come off the boil, as has the Fed’s balance sheet.
38:12 | The US Treasury General Account has swelled, pregnant with inflationary potential. Or is it only ‘a little pregnant’?
41:28 | The US rainy-day fund won’t be used on a ‘sunny day’ (inflation) but in the midst of an enormous storm (deflation).
So Long As The Bucket Is Full of Holes, Treasury Demand Comes First: https://bit.ly/396PDn5
Transitory, The Other Way: https://bit.ly/3h89HZc
Wait A Minute, The Dollar And The Fed’s Bank Reserves Are Directly Not Inversely Related: https://bit.ly/3jiItBc
A General Sense of Treasury’s General Account: https://bit.ly/2Ox9h2n