Some concern by Monetarists out there that current short term risk free rate of interest compared to the average of a past period of the short term risk free interest rate is a cause for serious concern wrt equity prices…
Think of financial asset prices as a function of the equation P = (A-L)/A where A and L are Depository system Assets and Liabilities…
At point 1 the fiscal surpluses were being saved in the TTL accounts at Depositories increasing system L by $100Bs … at point 2 the Fed increased Depository system A by hundreds of billions in September 2008, causing credit provision to cease and the GFC …. and at point 3 they again did the same thing as 2 establishing over $1 trillion of A in March 2020 causing the credit function to again cease until this regulatory function was suspended ….
Today Treasury no longer utilizes TTL accounts and we are in large fiscal deficit anyway, and no where have I seen currently is the Fed proposing to increase A at this time rather their stated policy is to continue to gradually “normalize” system A at much lower levels…
“Correlation is not causation” etc…
14 comments:
"Correlation is not causation."
Exactly. But it's what these people always seem to do.
They have no training in the regulatory mathematics Mike ..
"Correlation is not causation."
It is with the $ and oil.
Because as as a STEM guy you go back to the exact time the change happened and analyse the actual real data and What changed if anything.
It was mainly an inverse relationship until Tillerson and Cohen did what they did during Trumps first term.
Chris Cooke laid all out for everybody. The time the place and the reason for it. How he thinks they did it Using these articles to do so.
https://seekingalpha.com/author/chris-cook
Using the real data since the change, nobody has been able to discredit it.
Or act like an art degree moron and completely ignore the real data since the change and bury your head in old economic textbooks about the $ and inflation.
We have only watched with our own eyes the $ rise and fall with the oil price for nearly 7 years now.
People still ignore it. Bury your head in old economic textbooks about the $ and inflation.
If the price of oil goes up in USD terms then all oil collateralized assets at the depositories goes up also in USD terms …
If a foreign depository experiences an increase in value of a USD collateralized asset then that depository has to reduce the value of its non USD collateralzed asset to maintain a constant regulatory ratio … ie USD value goes up…. The exchange rate is a composite index of current terms of trade ..
iow the exchange rate does not adjust because there is a “correlation” … it adjusts because the depository systems in the different nations are independently regulated …
F=ma…. You wouldn’t say “force is correlated with mass x acceleration”… it’s a functional equation… same with the exchange rate …
Yet everything changed.
It adjusts now because the $ is On an oil standard.
When we came off the gold standard morons still act as if we are still on it. Yet, everything changed.
Now the $ is On an oil standard they now act as if we aren't, yet everything changed.
Chris Cook isn't the genius he thinks he is. The US has become an oil exporter again. That's all you need to know.
Neil if trump wins expect those exports to increase and now he’s talking about taking the surpluses and putting them in a US sovereign wealth fund like Norway.,,
All he has to do is pull US navy out of the gulf and Red Sea and collapse that supply route… then export oil and LNG from US via a secure North Atlantic route..,
speaking of regulatory maths. can't read it as behind paywall but seems there will be some bank capital hikes coming soon. depends on how much they raise it by i suppose
https://www.bloomberg.com/news/articles/2024-09-09/biggest-us-banks-capital-hike-chopped-in-half-in-latest-plan-by-regulators
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