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Twitter: https://twitter.com/JeffSnider_AIP
Twitter: https://twitter.com/EmilKalinowski
Art: https://davidparkins.com/

Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski, Double-Dutch auctioneer. Artwork by David Parkins. Podcast intro/outro is “The Great Ascension” by Christoffer Moe Ditlevsen at Epidemic Sound.


37.3 Treasury Bills: The Case of the Missing Money
All debt is equal, but some debt is more equal than others.  Treasury market short-term bills hold a special place in the monetary hierarchy. Does recent selling of Bills signal economic hope? Or something else more mundane?

[Emil’s Summary] “The Case of the Missing Money” is not an Arthur Conan Doyle short-story but instead a 1976 essay by well-known economist Stephen Goldfeld who noticed that there wasn’t enough money to justify the high level of economic activity at that time. Goldfeld explained that money was traditionally a simple function of, “real gross national product, [and] the interest rates on savings and time deposits at commercial banks and on commercial paper.”

But that formula was suddenly producing “whopping”, “unprecedented”, “quite unacceptable” and “conspicuous” errors that stood out “like a sore thumb”. The clue to the mystery — which he was not able to solve at the time — was that the formula for currency was on target BUT the one for checking accounts was unreliable. The monetary format under the auspices of public institutions — cash and coin — was fine. But the monetary format that was the domain of private banks — deposit accounts — was way short.

But money WASN’T missing from the economy. Money as traditionally understood and defined by economists, THAT money was missing, but the market had broadened the definition in the 1960s and 70s by turning capital market securities into near-money, among many other evolutions. This suited the banks because, while they couldn’t print and mint official government money, they could ‘print and mint’ ledger ‘money’.

Just under half a century later the roles are reversed. A modern-day Goldfeld would note that official monetary formats like bank reserves are being created at a “whopping”, “unprecedented”, “quite unacceptable” and “conspicuous” pace that stands out “like a sore thumb”. But because the vastly more valuable private bank ledger balances are way short, our global economy suffers for it. In this 37th Episode of Making Sense, Jeff Snider writes and solves three mysteries: “Japan: The Case of the Missing Inflation!”, “Europe: The Case of the Missing Economy!” and “Treasury Bills! The Case of the Missing Money?”


00:05 How is US central government debt – Treasuries – sold?
02:30 Who buys US Treasury securities? Noncompetive bids, primary dealers, competitive bids, etc
04:09 What do the mechanics of a Treasury auction look like?
05:58 What is “Solly”? Who is Paul Mozer? Why did Mozer tell financial authorities to ‘get lost’
11:00 Why were financial institutions violating the law in the 1990s in order to get US debt?
12:16 A review of recent High, Median, Low bids, and effective yields of US Treasury debt
15:50 Surges in demand draw out ‘chasms’ in the low auction bids, hinting at monetary disorder
18:35 Would the opposite be true? If the economy recovers would we see ‘spikes in high bids?
20:25 Treasury Bills are being sold. Or, merely being ‘sold’? What’s happening in this key area?
23:02 Prudent debt management by the government likely explains why Bills had been ‘sold’.


Treasury Auctions Are Anything But Sorry Because They’ve Never Been Sorry About Solly: https://bit.ly/33rsLNL
Just Who Is, And Who Is Not, Selling T-Bills: https://bit.ly/2Jgw7w6
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7