43.1 The Fed doesn’t do Money so it offers Suasion
Central banks cannot define, identify, measure or map modern money. And they haven’t been able to since the 1970s. So instead they offer “moral suasion”. That’s a fancy word for threats, posturing and coercion. That’s all fine and well until the global economy requires money.

[Emil’s Summary] As many listeners have long suspected, your podcast host did, as a child, run away and join the circus.  Not dissimilar from a traditional childhood, it was your classic Gypsy camp.  If children misbehaved, we would be “lock[ed]… into stocks, or throw[n]… into a cage and hoist[ed]… into the flytower… dangling precariously over the stage.” Our ringmaster, Giuseppe Grimaldi “was horribly morbid, living in perpetual fear of death, and especially of being buried alive.  When he finally died… his will directed that his eldest daughter cut his head from his corpse just to be certain.” Sure, perhaps quirky, but certainly not the oddest troupe – not Pandemonium Carnival.

So, looking to make a career of it your podcaster tried his hand at clownship. But, by that time, famous clowns like Pagliacci, Pennywise and Pogo were, despite slaying their audience with their routines, giving a bad name to the profession. So then, this host turned to tarot card reading and hypnosis. Despite earning some minor acclaim in London as Madame Simza, your host simply didn’t have the chops and was forced to turn to the only option left: a Masters in Business Administration.

Surprisingly, it was an easy fit. Tarot cards – which “illuminate your past, clarify [the] present, show… the future” – had taught me everything I needed to know about finance. The card “Temperance, [when] inverted [is] indicative of volatility.” If one draws “The Fool, someone has been led astray” – an investment fraud. “The Two of Cups?” It represents “a powerful bond” – a sovereign bond. Your podcaster learned about hypnosis too, except that the economics professors used different terms for it: expectations policy, forward guidance, moral suasion.


But first, this from Eurodollar Enterprises! Friends, are you worried your monetary policies are causing lurid levels of inequality? Are you concerned civil war, its hour come round at last, slouches toward K Street? Do you worry how your supple neck will fare when the blood-dimmed tide is loosed? Then the new Eurodollar Enterprises Second Skin Neck Brace is for you! Yes, strut through The Waste Land knowing that marauding lynch mobs of War Boys pose no danger. The carbon-fibre nanoweave is comfortable, flexible and the ultimate luxury in an April dystopia you hastened. Barter aquacola for guzzoline at Thunderdome with no concern of the guillotine. Is that the Road Warrior with a chainsaw? Then save your skin… with your Second Skin Neck Brace. New! From Eurodollar Enterprises.


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, gets his moral suasion weekly.  Artwork by David “Zoltar” Parkins. Podcast intro/outro is “Whispering of the Stars” by Luella Gren at Epidemic Sound.  


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01:31 What is “moral suasion” and why do central banks employ it to achieve monetary goals?
03:46 Bernanke used moral suasion saying the Fed could achieve inflation anytime it wanted to
07:47 Bank reserve creation is an attempt to reinforce “moral suasion” (i.e. fancy talk)
10:52 What does the latest consumer price index reading tell us about money supply in the USA?
14:51 What does CPI readings in Europe and Japan tell us about central bank ‘money supply’?
18:12 What about producer prices? Is the central bank money flood showing up in commodities?
21:17 Why are gasoline / fuel / oil prices increasing? Is it a supply, demand or money story?


Suasion, Sure, But Is It Really Moral?: https://bit.ly/3bXMsBQ
If the Fed’s Not In Consumer Prices, Then How About Producer Prices?: https://bit.ly/2NomiOd
(Reinhart & Sbrancia) The Liquidation of Government Debt: https://bit.ly/363NUih
(Van Metre & Ashton) Everything You Wanted to Know About Inflation: https://bit.ly/2LZ8OZ5
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7