63.1 Bernanke’s Idea Doesn’t Make Any Sense

———Part 1 Summary———
In the early 2000s, bond markets ignored the Fed. Alan Greenspan called it a “conundrum”. Ben Bernanke blamed a “Global Savings Glut”. But recent Federal Reserve research notes events since 2008 upend the Bernanke glut and instead suggest economic weakness and financial fear as causal.

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

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———Ep 63.1 Topics———

00:43 What is Milton Friedman’s interest rate fallacy? Do low interest rates represent stimulus?
03:20 What is the “Greenspan Conundrum” from 2005? Why did US Treasury behavior perplex the Fed?
06:42 Greenspan’s Fed understood the bond market to be dependent on Greenspan Fed decisions.
09:15 The Fed appears to have an efficient market hypothesis view of asset bubbles.
13:33 Bernanke’s “Global Savings Glut” implies interest rates aren’t dependent on Fed decisions.
15:11 The Fed believes interest rates cause booms and busts, not money supply.
17:38 Two Fed researchers conclude the Global Savings Glut hypothesis stopps working after 2008.
19:29 A visual representation of current account surpluses / deficits by geoeconomic region.
22:39 “Secular Stagnation” (i.e. a lousy economy) seems to better account for interest rates.
24:04 Unhinged Eurodollar money creation boomeranging back to advanced economies – not a GSG.
26:03 Unhinged Eurodollar money creation began to spook markets, pushing them to safe assets.
28:02 Research is starting to note several inconsistencies of orthodox central banking.

———Ep 63.1 References———

Slight, But Only Slight, Movement In the Understanding of Rates: https://bit.ly/3t9B37Q
The Global Saving Glut and the Fall in U.S. Real Interest Rates: https://bit.ly/39WgTq0
Global Imbalances Tracker: https://on.cfr.org/3mIWx7W
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7

———Who———

Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski. Art by David Parkins.