56.3 Treasuries: Standard vs. Eurodollar Explanation
———Part 3 Summary———
Learn the difference between an orthodox-economics and a shadow-money view of US Treasuries. The mainstream says, ‘Too many Treasuries!’ and ‘Emerging markets in danger!’ Is that true?
———Episode 56 Intro———
Space, the final metaphor. Why do central bankers offer spirographic, retrograde answers? Because they operate within a Ptolemaic paradigm – a geocentric model of our monetary system in which the central bank is the hub around which all else revolves. Why is unobservable, offshore credit fundamentally important? Because like dark matter and dark energy, this shadow money represents the broad majority of material and heat that constitute our monetary universe.
Which brings your podcaster to the 21st chapter of “The Courage to Act” authored by Ben Bernanke. There, the former chairman defends the Fed’s second quantitative easing in 2010 because of an economic “false dawn”. No mere rhetorical flourish, the false dawn is a regular astral phenomenon. Each autumn and spring, the northern and southern latitudes respectively, will observe a triangular diffusion of light rising above the horizon. It seems to herald recovery from the darkness.
But Sol won’t come. Not yet at least. Light, yes. But the wrong kind. Instead of a medley of warm colors refracted by the near atmosphere, the false dawn is a sterile white, originating far beyond our Earth, in cold space. Officially known as the Zodiacal Light, we witness interplanetary dust particles reflecting sunlight.
Perhaps not surprisingly, Bernanke’s book had no further chapters on economic false dawns despite their taking on an astronomical regularity, arriving again and again and again in 2011, 2014 and 2017. Jeff Snider, part-time monetary sleuth and full-time cosmos student, recognizes the difference between reflation’s false dawn and recovery’s warm glow. In this, the 56th episode of Making Sense, we review the light coming over the horizon from negative repo rates, surging M2 money supply and rising US Treasury yields. We find it cold, fallow and gray.
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———Ep 56.3 Topics———
00:05 US Treasury yields are rising, worrying some who say, ‘There are too many Treasuries!’
02:08 The ‘too many Treasuries’ argument was advanced in 2016…
04:09 … and again in 2018
08:18 What can we learn from gold about US Treasuries?
10:29 Do rising US Treasury yields endanger emerging market economies? The mainstream says “yes”
13:39 A similar situation took place in 2018 – what can we learn?
17:00 Hedgeye Investing Summit
———Ep 56.3 References———
What Gold Says About UST Auctions: https://bit.ly/2OqPJA4
Standard Textbook Dollar, Or Eurodollar Standard?: https://bit.ly/3cuDNWc
Unexpected U.S. Growth Surge Could Unbalance Fragile Global Economy: https://on.wsj.com/3cndEsg
Hedgeye Investing Summit (2021, Mar-16/18): https://bit.ly/38TkogL
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 David Parkins, on an errand, sent by grocery store clerks, to collect a bill. Podcast intro/outro is “Departure Lounge” by Brendon Moeller at Epidemic Sound.
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