54.3 Deficits + Bond Losses + Inflation Fear = 1937?

———Part 3 Summary———
In 1937, like now, circumstantial evidence and biases of central bankers suggested the impending arrival of fierce inflation: huge government deficits, better economic statistics, rising bond yields and excess bank reserves. Yet the underlying condition was of depression and credit illiquidity.

———Episode 54 Intro———

“The pen is mightier than the sword.” “The great unwashed.” “Pursuit of the almighty dollar.” These are phrases we have all heard and they come from a single source: 19th century English writer and politician Edward George Earle Lytton Bulwer-Lytton.  Bulwer-Lytton was a successful novelist, poet and playwright.  His political accomplishments included nine years in Parliament, serving as the British Colonial Secretary, and being offered – AND TURNING DOWN – both a lordship of the Admiralty AND the Crownship of Greece (i.e. king)!  Today he is remembered for writing… the worst opening sentence in the history of the English-speaking peoples:

“It was a dark and stormy night; the rain fell in torrents — except at occasional intervals, when it was checked by a violent gust of wind which swept up the streets (for it is in London that our scene lies), rattling along the housetops, and fiercely agitating the scanty flame of the lamps that struggled against the darkness.”

Episode 54 reviews articles by Jeff Snider covering: the Treasury inflation-protected securities curve inverting, the life span of a post-2008 reflation, the curious appreciation of the Chinese currency, as well as how Fed officials in 1937 convinced themselves of an impending inflationary storm (in the middle of an economic depression).  None of those articles open in the Bulwer-Lytton style — precisely the opposite!  And yet many – some, a few… someone… And yet this podcaster wonders, how might a Eurodollar University educated author open their novel?

It was a dark and stormy depression; bank reserves fell in torrents — except at occasional intervals, when they were checked by a breath of reflation which swept up economists (for it is in the Eccles Building that our scene lies), rousing along the academics, and fiercely inflating the faith in a recovery that struggled against the darkness.

———See It———

AlhambraTube: https://bit.ly/2Xp3roy
Twitter: https://twitter.com/JeffSnider_AIP
Twitter: https://twitter.com/EmilKalinowski
Art: https://davidparkins.com/

———Hear It———

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———Ep 54.3 Topics———

00:05 Large debt loads, accelerating deficits and rising interest rates – welcome to 1937
02:58 The US Treasury demanded The Fed fix / stop rates from rising further – welcome to 1937
05:47 How did the Federal Reserve’s balance sheet change during the 1930s?
09:41 Why do central banks feel it is necessary to be ahead of inflation’s appearance?
13:12 How did the private banking system’s balance sheet change during the 1930s?
15:08 Why did the private economy pile into government bonds, including municipalities in the 1930s
18:20 Monetary scholarship reached a low point in the 1920s. We’ve fallen into the same trap.

———Ep 54.3 References———

There’s Precedent for Yellen Demanding a Central Bank Rescue: https://bit.ly/3qoUQxF
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 with Emil Kalinowski. Art by Master Quillsman, David Parkins. Podcast intro/outro is “Nocturne” by Trevor Kowalski at Epidemic Sound.