Operation ZOV: quagmire and fog
The Saker Staff
http://thesaker.is/operation-zov-quagmire-and-fog/
1945
How the Ukraine War Could End: Stalemate or Russia Captures Kharkiv and Odessa (If Andrei Martyanov and others are correct, Davis is underestimating Russian military capability.)
Lt. Col. Daniel L. Davis (USA ret.), Senior Fellow and Military Expert for Defense Priorities
https://www.19fortyfive.com/2022/07/how-the-ukraine-war-could-end-stalemate-or-russia-captures-kharkiv-and-odessa/
Russia about to ‘run out of steam’ in Ukraine, British spy chief says
Larry C. Johnson | CEO and co-founder of BERG Associates, LLC, an international business-consulting firm with expertise combating terrorism and investigating money laundering, formerly Deputy Director in the U.S. State Department’s Office of Counter Terrorism (1989-1993, and CIA operations (1984-1989)
https://sonar21.com/russia-about-to-run-out-of-steam-in-ukraine-british-spy-chief-says/
Turcopolier
“Russia using 85% of fighting force in Ukraine …” (Col. Lang buys into the narrative.)
“Russia using 85% of fighting force in Ukraine …” (Col. Lang buys into the narrative.)
Col. W. Patrick Lang, US Army (ret.)
https://turcopolier.com/russia-using-85-of-fighting-force-in-ukraine/
Moon of Alabama
U.S. Attempts To Make China An Enemy Require A Lot Of Fantasy (When I was serving as a US naval officer in the Western Pacific during the lead-in to the Vietnam debacle, I realized that the entire US narrative is a fantasy.)
https://www.moonofalabama.org/2022/07/us-attempts-to-make-china-an-enemy-require-a-lot-of-fantasy.html
50 Sick Headlines About Vladimir Putin's Health (more fantasy)
U.S. Attempts To Make China An Enemy Require A Lot Of Fantasy (When I was serving as a US naval officer in the Western Pacific during the lead-in to the Vietnam debacle, I realized that the entire US narrative is a fantasy.)
https://www.moonofalabama.org/2022/07/us-attempts-to-make-china-an-enemy-require-a-lot-of-fantasy.html
50 Sick Headlines About Vladimir Putin's Health (more fantasy)
https://www.moonofalabama.org/2022/07/50-sick-headlines-about-vladimir-putins-health.html
One World
Andrew Korybko, American geopolitical analyst and independent journalist based in Moscow, and member of the expert council for the Institute of Strategic Studies and Predictions at the People’s Friendship University of Russia
https://oneworld.press/?module=articles&action=view&id=3095
51 comments:
July 2020:
"Inflation will top in Feb 2021"
Feb 6th 2021:
"Before the next stimulus, breakevens should peak with the release of the CPI on Feb. 10, 2021."
Feb13:
https://fred.stlouisfed.org/series/T10YIE
Why did Volcker fail?
https://monetaryflows.blogspot.com/2022/01/paul-volcker-is-no-icon.html
Fundamentals Indeed Pecede Technicals
https://monetaryflows.blogspot.com/2018/07/its-funny-but-not-ha-ha.html
"Monetary policy objectives should be formulated in terms of desired rates-of-change in monetary flows, M*Vt, volume X’s velocity, relative to RoC's in R-gDp.
RoC's in N-gDp (though "raw materials, intermediate goods and labor costs, which comprise the bulk of business spending are not treated in N-gDp"), can serve as a proxy figure for RoC's in all transactions, P*T, in American Yale Professor Irving Fisher's truistic: "equation of exchange".
The fact is that these McCarthyite armchair economists are “Know-Nothings”. The stagflationists don’t know money from mud pie.
Rates-of-change in monetary flows, volume X’s velocity (for the same time intervals or distributed lags), equal RoC’s in P*T (where N-gDp is a subset of “aggregate nominal spending”).
The distributed lag effect of money flows have been mathematical constants for greater than 100 years.
Thus we know several things, that money is robust, that the RoC in R-gDp = exactly 10 months, trough to peak.
And we know whether money is robust because we know when inflation accelerates relative to inflation, whose distributed lag is exactly 24 months, trough to peak.
Since the distributed lag effects of monetary flows are mathematical constants (which no economist understands or even knows about), you know in advance, what the trade-off between R-gDp and inflation, or the monetary fulcrum, will be.
So we know when interest rates will respond to the monetary fulcrum, based on fixed money lags, and the "arrow of time".
So to target N-gDp is stupid. It maximizes inflation and minimizes real-output. IF you can target R-gDp, why try targeting N-gDp? R-gDp accelerates before inflation. And we know when the teeter-totter tips.
That’s why you target R-gDp as a policy standard, and obviously, not the other way around. The debit and deposit turnover time series is documentary proof.
Elephant Tracks:
https://monetaryflows.blogspot.com/2018/06/the-nattering-naybobs-elephant-tracks.html
"The figures below
2007-01-31 47426
2007-02-07 39015
There was an $8.4 billion drop in complicit reserves before the financial markets even reacted.
NSA “total checkable deposits”.
But these are the figures below that economists, like John Cochrane and Ben Bernanke, use to “prove” [sic] that money is neutral:
2007 Jan 44.607
2007 Feb. 40.671
2007 March 40.671
2007 April 42.498
2007 May 44.075
2007 June 43.866
2007 July 42.909
You won’t find much difference in the seasonal variation using other yearly figures. So it looks like nothing’s there, or anywhere, to upset the apple cart!
John Cochrane and Ben Bernanke didn't see anything.
Hence my gold zinger call- Suckers Rally If gold doesn't fall, then there's a new paradigm"
20/6/2018
" So, if you couldn’t figure out why stocks were down today, then now you know. This is the 4th seasonal inflection point, on 20/06/18, a lower low in weekly NSA “total checkable deposits”.
Well we know now how he called the top in the breakevens inflation in Feb.
:)
Sure enough 24 months
https://monetaryflows.blogspot.com/2021/11/economics-is-exact-science.html
Bottomed Feb 2020.
re: the Volcker myth
Voltaire remarked that it is possible to kill a flock of sheep by witchcraft if you give them plenty of arsenic at the same time.
We had a wage-price spiral in the 1970s led by unions, especially public sector unions. Volcker raises interest rates and Reagan fired over 11,000 air traffic controllers. Volcker gets the credit instead of Reagan.
Also, I haven't read the article that Footsoldier (aka Salmo Trutta) linked to (https://monetaryflows.blogspot.com/2022/01/paul-volcker-is-no-icon.html) but I plan on reading it later. I took a quick look at it, but what the hell!? Red letters on a black background? Like laser beams burning through the eyes.
Yesterday, I was toying around with a Firefox add-on called "Invert Colors" which helped when you have white text on a black background. It made things better, but not as good as black on a white background. I'll probably have to write some CSS code to correct.
Further to my comment,
I took a quick look at Footsoldier's linked article but not too long, kind of like when you look at the sun and quickly turn away before your eyes get burned, and this part stuck out:
Why did Volcker fail? For two main reasons. The first was the failure to recognize monetary lags. Contrary to Nobel Prize–winning economist Milton Friedman and Anna J. Schwartz’s “A Monetary History of the United States, 1867–1960 “monetary lags are not “long and variable”.
I believe that the monetary policy does operate with long and variable lags. The reason being that when central banks adjust rates, the people with variable debt like HELOCs feel it first and those with debt with longer maturities feel it later, sometimes years later. The reason that it's variable is the average maturity changes over time as people adjust to what they perceive central banks are going to do. As an example, this headline in Canada's Financial Post:
Canadian home buyers pile into variable loans, blunting impact of rising fixed rates
The market share of new variable-rate mortgages surged to 51 per cent in July, the highest level since the Bank of Canada began tracking the data in 2013, from less than 10 per cent in early 2020, and mortgage brokers say this has continued to increase since then.
So I ended up installing the add-on again, and it turns Footsoldier's red text into more of a blue/cyan color. Definitely more readable, though the background is still black. Here's a link to those who use Firefox:
Invert Colors
Thanks for doing that Ahmed,
Defo makes it easier to read.
The monetary lags are the inflation lags mentioned above. So what he means is once you know those lags predicting inflation becomes easier.
Problem being they look at the wrong things. Use the wrong tools.
He suggests what you should do is drive the banks out of the saving business. Should be formulated in terms of desired rates-of-change in monetary flows, M*Vt, volume X’s velocity, relative to RoC's in R-gDp.
Simply because you know through the lags what they are going to be. From trough to peak.
Regulation Q and the G.6 Debit and Demand Deposit Turnover release allowed you to do it but they discontinued both. Him and 3 others who worked there at the time fought against it but to no avail.
There's quite a bit of reading but you have to read the whole blog from Start to finish to get all the history and nuance of what he is talking about.
The very first article covers a bit of housing the 2nd article covers all of it.
https://monetaryflows.blogspot.com
Dunno why he done his blog in different colours. Believe me when I say I have read the whole blog several times and it was one pain in the butt the different colours.
But you defo have to read the whole lot. I done it in the bath.
Between him and Balan I am starting to get it. Like taking one of those pills in the film limitless. It is all coming together slowly but surely.
Just turn off page style.
Should be formulated in terms of desired rates-of-change in monetary flows, M*Vt, volume X’s velocity, relative to RoC's in R-gDp.
I think...
=
In terms of the rates of change in required reserves from a year ago M*Vt.
https://fred.stlouisfed.org/graph/?g=1vSN
Most of these things have been discontinued as banks changed. But weekly NSA total checkable deposits are defacto required reserves with a 30 day lag.
So even though they have discontinued required reserves by measuring checkable deposits 30 days prior against current data you get the rate of change M*VT. From that work out yearly ROC.
https://fred.stlouisfed.org/data/WTCDNS.txt
And guess what they discontinued them as well.
Rates-of-change in monetary flows, volume X’s velocity (for the same time intervals or distributed lags), equal RoC’s in P*T (where N-gDp is a subset of “aggregate nominal spending”).
Rate of change in real GDP
That's the 3 figures.
Money flows is an economic indicator, not a stock indicator. There are other relevant considerations.
But can determine things like this - The rate-of-change in the proxy for real-gdp (monetary flows MVt) peaks . The rate change in the proxy for inflation (monetary flows MVt) peaks. Therefore it should be obvious: Interest rates peaks.
The rate-of-change in monetary flows (our means-of-payment money times its transactions rate-of-turnover), or the proxy for inflation that's the yearly rate of change of required reserves/ checkable deposits.
When you get negative roc's in M*Vt. Sell all stocks.
Stock prices don't necessarily reflect R-gDp, but N-gDp. R-gDp can rise while N-gDp falls with the upshot being a deceleration in economic activity and falling stock prices.
But if both R-gDp and N-GDP are growing and R-gDp is growing faster than N-gDp then that is a buying opportunity.
Rates-of-change in money flows (our means of payment money stock times its transactions rate of turnover - a TAUTOLOGY);
Allows you to look ahead because of the lags trough to peak.
parse, dt, real-output, inflation, bond index
01/1/2015 ,,,,, 0.13 ,,,,, 0.31 ,,,,, 0.33
02/1/2015 ,,,,, 0.09 ,,,,, 0.31 ,,,,, 0.31
03/1/2015 ,,,,, 0.10 ,,,,, 0.29 ,,,,, 0.31
04/1/2015 ,,,,, 0.08 ,,,,, 0.27 ,,,,, 0.30
05/1/2015 ,,,,, 0.05 ,,,,, 0.29 ,,,,, 0.30
06/1/2015 ,,,,, 0.06 ,,,,, 0.25 ,,,,, 0.29
07/1/2015 ,,,,, 0.08 ,,,,, 0.27 ,,,,, 0.29
08/1/2015 ,,,,, 0.07 ,,,,, 0.27 ,,,,, 0.29
09/1/2015 ,,,,, 0.07 ,,,,, 0.27 ,,,,, 0.29
10/1/2015 ,,,,, 0.00 ,,,,, 0.22 ,,,,, 0.29
11/1/2015 ,,,,, 0.02 ,,,,, 0.22 ,,,,, 0.29
12/1/2015 ,,,,, 0.02 ,,,,, 0.13 ,,,,, 0.29
December's evaporation of M*Vt(-9 in 1 month & -14 in 3 months), still looks unbelievably weak. But look at 2016's bond index!
When RRPs on the H.4.1 statement move lower (representing the injection of money by non-bank counterparties - this represents positive Vt.
Money is created by both (1) Reserve bank (FRB-NY's "trading desk"), and (2) commercial bank credit (new loans and investments).
RRs are based on total checkable deposits 30 days prior (so you already have some idea of what to expect).
Vt is based on the ratio of non-bank to CB credit expansion.
Looking at the FRB-STL's FRED database as they isolate (report data series separately), factors supplying and absorbing reserve balances.
But I'm still learning and look forward to playing about with it. To see what happens.
But not much use Because as you can see below the important ones have been discontinued by Powell. If they bring them back I can play about with them more.
https://seekingalpha.com/instablog/7143701-salmo-trutta/5182465-dark-side-of-moon-seasonal-clock
Unless anyone knows what they replaced required reserves or Checkable deposits with ?
He says
"The “confusion” is a deliberate policy to make it impossible to evaluate what the FED is doing. The FED has relentlessly stoked the fire of inflation, even after inflation accelerated. It has continued with its POMOs, it has eliminated reserve requirements, it has continued to purchase MBS, it has eliminated withdrawal restrictions on savings accounts. I.e., Powell is not reversing any of the policies that he unleashed to plug the gDp / Covid-19 gap."
Hasn't posted a thing since March.
I think all MMT would need to do is turn back the clock
Get rid of the interbank lending, get rid of bonds, banks back on the 363 model. On the golf course by 3.
Knowing those lags are constant and have been for over 100 years so much easier to keep an eye on inflation and growth.
Political problem as always the right would rather shot you first before any of that is going to happen.
Just turn off page style.
Thanks, that works. The only thing is that the text is now across the whole screen. On a hunch, I tried pressing "Toggle reader view" in the URL bar and that also works, giving black text on a white background but maintaining the width of the paragraphs.
Sometimes "reader view" leaves out charts, but in any event, it's nice to have more than one tool to use.
They are are going to have to do something or the world is going to be stuck between rising asset prices on one hand and increasing rates to create unemployment on the other. America is definitely turning Japanese the land of housing and stock bubbles forever. Everyone else suffers.
All savings originate within the confines of the payment's system. So, the Fed’s monetary transmission mechanism via remunerated IBDDs, interest rate manipulation, now determines the velocity of circulation, or the proportion of bank-credit (new money) vs. nonbank credit (where savings are activated).
This is similar to how the old Regulation Q ceilings functioned. I think if they raise the rate it slows down nonbank credit (where savings are activated) and thus Vt.
Somebody might be able to work that out and confirm that.
Cause I know raising Regulation Q ceilings was one of the main reasons behind the " credit crunch "
"Should be formulated in terms of desired rates-of-change in monetary flows, M*Vt, volume X’s velocity, relative to RoC's in R-gDp."
You need to expand the monetarist mumbo-jumbo, because none of that Jargon makes sense.
There's also the issue of why Americans like 'non-banks' rather than 'banks' to hold their deposits. What's the systemic problem they solve.
You use the ROC of Required reserves year of year that's the proxy for inflation.
RoC's in N-gDp (though "raw materials, intermediate goods and labor costs, which comprise the bulk of business spending are not treated in N-gDp"), can serve as a proxy figure for RoC's in all transactions, P*T, in American Yale Professor Irving Fisher's truistic: "equation of exchange".
With or the same time intervals or distributed lags, equal RoC’s in P*T (where N-gDp is a subset of “aggregate nominal spending.
All relative to rate of change of real GDP.
So it gives you these 3 figures.
Rate of change in real output
Rate of change in inflation
Thus rate of change in the bond index.
parse, dt, real-output, inflation, bond index
01/1/2015 ,,,,, 0.13 ,,,,, 0.31 ,,,,, 0.33
02/1/2015 ,,,,, 0.09 ,,,,, 0.31 ,,,,, 0.31
03/1/2015 ,,,,, 0.10 ,,,,, 0.29 ,,,,, 0.31
04/1/2015 ,,,,, 0.08 ,,,,, 0.27 ,,,,, 0.30
05/1/2015 ,,,,, 0.05 ,,,,, 0.29 ,,,,, 0.30
06/1/2015 ,,,,, 0.06 ,,,,, 0.25 ,,,,, 0.29
07/1/2015 ,,,,, 0.08 ,,,,, 0.27 ,,,,, 0.29
08/1/2015 ,,,,, 0.07 ,,,,, 0.27 ,,,,, 0.29
09/1/2015 ,,,,, 0.07 ,,,,, 0.27 ,,,,, 0.29
10/1/2015 ,,,,, 0.00 ,,,,, 0.22 ,,,,, 0.29
11/1/2015 ,,,,, 0.02 ,,,,, 0.22 ,,,,, 0.29
12/1/2015 ,,,,, 0.02 ,,,,, 0.13 ,,,,, 0.29
Remembering that he Only traded the bond futures. So by knowing the first 2 in advance he can predict the one he trades.
The rate-of-change in the proxy for real-gdp (monetary flows MVt) peaks . The rate change in the proxy for inflation (monetary flows MVt) peaks. Therefore it should be obvious: Interest rates peaks.
So knowing in advance when the bond index peaks or troughs when does that come in handy ?
The 6 seasonal inflection points and when they are going to turn.
Like with Balan that changes things.
So what's the difference ?
Balan uses the Elliot wave to predict when the 10 year is going to peak and trough and if the pivot is going to be early or late.
Salmo uses this method. Which is far more accurate because the lags haven't changed over 100 years.
So once he has identified in advance what date the bond index will peak around the seasonal inflection points he is off to the races.
Why he has never lost a futures bond trade.
Not just that once he knows the date of the turn on that date he checked the rate of change on required reserves / checkable deposits. What they were telling him.
The patterned / zombie behaviour that links stocks, bonds, gold, $, oil.
Here
https://seekingalpha.com/instablog/7143701-salmo-trutta/5176318-4th-seasonal-inflection-point
There's also the issue of why Americans like 'non-banks' rather than 'banks' to hold their deposits. What's the systemic problem they solve.
In his mind Vt.
Turning Japanese. Inflated housing markets inflated stocks, inflated assets.
Full circle with the glut of savings that keeps downward pressure on interest rates or as Matt would say $ zombies.
It is 2 different things
How he traded bond futures
Why America and the world will always end up were we are today in a stagflation environment. To get out of it change the way things are done.
RoC in R-gDp = exactly 10 months, trough to peak.
we know when inflation accelerates relative to inflation, whose distributed lag is exactly 24 months, trough to peak.
He watched this all the time probably had a model.
This is why a lot of the time when the seasonal pivot comes the pivot does the opposite of what it is supposed to do.
Most of the time is waiting. Waiting for the stars to align so everything peaks at once in pivot day. That's when the big corrections happen and the big money is made.
Balan can continue to do it because none of his tools have been discontinued he uses Elliot wave. Which isn't as precise.
Fundamentals proceed technicals.
Salmo used the fundamentals but Powell has taken his tool box away.
What does the CB game tell you ?
https://new-wayland.com/blog/sim-cb-an-economic-game/
Messing around with interest rates appears to make the economy more volatile - except during the growth phase.
That any positive interest rate will lead to crisis as soon as the economy gets a negative shock.
Set the interest rate to zero and let it run. Watch how that policy handles the ups and, particularly, the downs with aplomb.
But as we have just had a front row seat and witnessed when you do that you get a very broad asset bubble in different assets.
Because of the way the system is set up.
So you end up with
a) positive interest rate will lead to crisis unemployment.
b) positive rates will be used tame asset prices and forced unemployment.
This seems to be happening on a more regular basis.
Maybe the Ukraine war will change it but we won't as it is a political problem and we have zero political power.
Rationist No. 4: An independent middle class is the sine qua non of democracy
https://the-blindspot.com/rationist-no-4-an-independent-middle-class-is-the-sine-qua-non-of-democracy/
it's all turning more authoritarian.
Your TV and media are filled to the brim with these middle class w@ankers.
They turned authoritarian in a heart beat and screamed for more On social media.
I can't see a way out and things are just going to get worse and at a faster pace.
But maybe I'm a cynical bast@rd.
I think this model would be a perfect fit with what Mike is doing.
Let's you know when looking at the flows Mike looks at, if things are fine and dandy or if their is a iceberg ahead that the deficit and normal bank lending figures don't show.
Just add to his dashboard.
Do the normal MMT analysis and a quick cross check with what Balan is saying.
The MMT analysis got caught at the top and stuttered all the way down this stock market correction. Balan rode it like a wave and saw it coming a mile off way before the tax cuts filtered through.
I'd use this type of analysis like a look out on the titanic. Plot the course making sure you avoid the iceberg.
If you look at Balans analysis of his gold and $ trade.
https://seekingalpha.com/instablog/910351-robert-p-balan/5756120-buy-back-of-gold-gc-short-hedgers-completed-initiate-long-pm-and-miners-positioning
For weeks since the last pivot he has been using Elliot wave to tell him when the 10 year tops. A wind blows through. Elliot wave is saying ' around' middle of August.
Salmo could give you the exact date by now when 10 year peaks. If Powell never took his tools away.
That's the difference.
Stock prices don't necessarily reflect R-gDp, but N-gDp. R-gDp can rise while N-gDp falls with the upshot being a deceleration in economic activity and falling stock prices.
But if both R-gDp and N-GDP are growing and R-gDp is growing faster than N-gDp then that is a buying opportunity.
Why he tracks rate of change in N-GDP.
A perfect comparison would be comparing Alan Longborn Australian MMT market analysis from before and after he joined up with the wee corner of seeking alpha that looks at this stuff.
2018
https://seekingalpha.com/instablog/6770371-alan-longbon/5248505-november-2018-u-s-deficit-205b-markets-set-to-rise
2022
https://seekingalpha.com/article/4523188-the-white-house-fed-inflation-and-flow-of-funds-for-july-2022
He's added that wee corner of seeking alpha to his own MMT analysis to make it better. To see the seasonal icebergs or trade winds long before they appear on the horizon. Well as far as the Elliot wave can see out.
All of it ties in perfectly with MMT'r Bill Blacks work.
When he was a regulator during the dramatic change in banking when the non banks were morphed into the blob.
https://neweconomicperspectives.org/category/william-k-black/page/12
What happened to the SWIFTs and community banking under his watch.
Salmo sees all of that as a huge drop in Vt. Why he was able to call the bottom and the tops of the markets at the time.
1966 Interest Rate Adjustment Act
https://seekingalpha.com/instablog/7143701-salmo-trutta/5265714-1966-interest-rate-adjustment-act
1966 Interest Rate Adjustment Act II
https://seekingalpha.com/instablog/7143701-salmo-trutta/5265717-1966-interest-rate-adjustment-act-ii
MMT says " banks don't lend out reserves"
But we never broke down all the components and put dials on them when things changed that showed plus or minus Vt.
Or plus or minus Vt dials on all the rates the FED controls.
Why Salmo says we don't know a debit from a credit. Calls us stagflasionists.
Debated it with him for over a year saying we had it covered. But there's no consensus between all MMT'rs ( as per usual ) on a policy moving forward. As it is just a lens.
MMT should have been more policy focused than lens focused.
Why it has been sooooooo easy for the mainstream to win the social media inflation debate.
“ The MMT analysis got caught at the top and stuttered all the way down this stock market correction. ”
It’s the interest rate increases…. Any increase in the risk free rate lowers the price (NPV) of fixed return financial assets…
So stocks and bond prices have come down about 20%… with overnight terminal rate policy where it is right now…
This is taught in Finance and Accounting Science
https://corporatefinanceinstitute.com/resources/knowledge/valuation/net-present-value-npv/
To front run it you have to read the mind of the Fed… ie impossible…
Risk right now is Fed keeps going past what is currently being discounted…
Democrats have thrown the US economy under the bus as Larry Summers has Biden’s ear and is prioritizing the defense of his Art degree Monetarist Theory over the US economy …and gop is successfully egging them on to have shitty economy into November elections…
So now they are starting the QT which is going to increase availability of credit through SLR increase (they think it’s opposite “less money to lend out!” reification) which could be supportive of current prices (begetting further rate increases) … OR … an increase of credit availability will allow larger financed inventories of industrial products and those unit prices could come down as supply will return to previous normal levels…
Future application of any currently unanticipated risk free rate increases will be bearish .. QT will be bullish…
These two policies will trade off…
Take bank credit. It's missing the savings and loans and credit unions credit. The DIDMCA turned 38,000 non-banks into banks, the S&Ls, CUs, and MSBs. But the only measure the FED changed was the bank's liabilities, which were added to the money stock.
Lending by the Reserve and commercial banks is inflationary, whereas lending by the non-banks is non-inflationary, ceteris paribus. If you bottle-up savings, you are pressured to offset the decline in AD, the decline in velocity, with money products, or QE forever.
The hypothetical Wicksellian natural rate of interest has an incalculable impact on AD, in both magnitude and timing. Whereas the injection of new money has a fixed impact on AD, in terms of magnitude and timing.
The increased lending capacity of the financial intermediaries is comparable to the increased credit creating capacity of the commercial banks in only one instance; namely, the situation involving a single bank which has received a primary deposit. But this comparison is superficial, since any expansion of credit by a commercial bank enlarges the money supply, whereas any extension of credit by an intermediary simply transfers the ownership of existing money.
Fed is reactive, not proactive
That's an illusion. Swapping duration for cash destroys velocity.
How does the substitution of liquid assets for cash increase liquidity? It's a decomposition of stock vs. flow. The volume of IBDDs, interbank demand deposits, outside money, has very little reserve velocity.
The volume of trading in the interbank market, the federal funds volumes, has diminished, and is dominated by the GSEs, the nonbanks (comprising 90% of all transactions).
Bank behavior, lending standards, is similar to the Great Depression, i.e., "pushing on a string"
As the demand for money increases, velocity falls. Demographics has nothing to do with it. As Dr. Philip George puts it: “Changes in velocity have nothing to do with the speed at which money moves from hand to hand but are entirely the result of movements between demand deposits and other kinds of deposits.The velocity of money is a function of interest rates
..
https://seekingalpha.com/user/7143701#comments
Contrary to the accountants at the Board of Governors of the Federal Reserve System (in contradiction to the presupposed Generally Accepted Accounting Principles, GAAP, e.g., the cost principle, the matching principle, the time-period specific principle, the recognition principle), the sale of securities by the FRB-NY’s trading desk decreases both the assets and liabilities of the Reserve Bank. It is not just an “exchange in liabilities”. The asset reflects an exchange in ownership ( a debit on the left to the recipient of RRP’s remuneration).
Otherwise how would the funding facilities even work?
I.e., the FED is not “behind the curve”
O/N RRPs are an unrecognized subtraction from the broad money stock:
Including O/N RRPs in the money stock is just one of many errors.
Apr ,,,,, 0069
May ,,,,, 0290
Jun ,,,,, 0673
Jul ,,,,, 0848
Aug ,,,,, 1053
Sep ,,,,, 1211
Oct ,,,,, 1425
Nov ,,,,, 1445
Dec ,,,,, 1600
Surreptitious tightening.
.
The nonbanks are using the O/N RRP facility because it provides higher rates of return. But at the same time, an increase in reverse repos drains the money stock. If rates rise, the nonbanks won't need to use the facility. So, the money stock will rebound.
The strong $ is due to the foreign O/N RRP facility
https://finadium.com/zoltan-pozsar-the-feds-foreign-rrp-facility/
Case in point, the O/N RRP facility. Aug, 9 WSJ:
"In their Aug 6. letter in response to our op-ed “How the Fed Is Hedging Its Inflation Bet” (Aug. 2), John Greenwood and Steve Hanke argue that the Fed’s sale of a trillion dollars of reverse repos does not in and of itself reduce the deposit liabilities of banks and money-market mutual funds, and that the money supply is unaffected. By that logic, none of the monetary tools of the Federal Reserve Bank would affect the money supply."
"Of course, if the buyer of a reverse repo or a security sold by the Fed is a nonbank and pays for the purchase using its bank account, the money supply is directly affected."
"The Fed Indirectly Shrinks the Money Supply"
To front run it you have to read the mind of the Fed… ie impossible…?
They all front ran it using the the 10 year yields. Along with the seasonal moves. I watched them front run it. Be on the correct side of every pivot.
Since Jan to today plot the 10 year v's stock market.
Back then I never really fully understood what it was and trying to learn it as I went along. Over the past month it has all fallen into place for me. I can see clearly what they are doing now.
March 29th big correction
June 7th big correction
Pivot ↓ #1 3rd week in Jan.
Pivot ↑ #2 mid March
Pivot ↓ #3 May 5th
Pivot ↑ #4 mid-June
Pivot ↓ #5 July 21st
Pivot ↑ #6 2-3 week in October
Just wait until you see what those dates mean in 2023.
Size of the budget deficit never saw any of them. Saw the tax drain too late. Budget deficit was saying everything was fine and dandy right up to the tax drain showed itself.
Just watch if nothing changes and pivot 5 appears in a couple of weeks. Watch what happens. There's a 70% you are going to get a bounce up through the the shorts walls in the market.
30% chance stocks will follow the 10 year yields lower.
I'll keep posting it up as we get closer. How those %'s change. Keep an eye on them and match them with what you monitor. See if it helps any. See if you can marry the two.
Some are saying it might create a market rally to year end. 2023 is going to be bad and worried that the bad night show up by then in pivot 6 this year.
That's if the FED and treasury just plod along. But they can easily change things in the meantime.
Has to be monitored on a daily basis. The picture can change and change Quickly.
“the sale of securities by the FRB-NY’s trading desk decreases both the assets and liabilities of the Reserve Bank.“
They don’t sell any securities they are redeemed by the issuer…
So all Fed does is reduce the TGA for the redemption amount…
“ O/N RRPs are an unrecognized subtraction from the broad money stock:”
This is laughable because if the “money stock” was increasing these guys would say it was bullish … meanwhile if thecFed cane out Monday and said”RRP is cancelled” then their “money stock “ would increase by 2.2T in one day and the whole thing would crash by probably 50%… September 2008 and March 2020 on steroids..,,
Discussion with Scott Sumner and putting him in his place in the comments section
themoneyillusion.com/focus-on-the-ratio-of-private-sector-and-fed-inflation-forecasts/
What’s he saying now?
Bullish or bearish or neutral?
Footsoldier,
I’m dying. And I believe in capital punishment. Assholes like you should be capped.
Seriously? The article is dated 2016, and it's now 2022. Are you actually dying, or just making stuff up?
As an aside, I don't thing the discussion went the way you thought it did.
Footsoldier,
You commented on Seeking Alpha as "flow5" but you used the same avatar as you used for "Salmo trutta". What, too lazy to make up another avatar? You're getting sloppy.
flow5 (first comment) - Money Supply Divergence - TMS1 vs. TMS2 vs. M2 - What Does It Mean?
Salmo trutta profile: Salmo trutta
See, same fish.
I should have just linked the profile:
flow5 profile: flow5
I think flow5 is the guy Foot s talking about…
Foot is Derek Henry…
Foot posts as Derek Henry at bill Mitchell’s …
I don’t think these other ids are Foot … Foot is refering to their thesis…
Derek they still seem glorified monetarist to me… can’t help it I just don’t give monetarism any credit I think it is all a reification fallacy … iow they all think Accounting abstractions are real…
Like Taleb talking about his figurative “fat tails” like he thinks they are real…
Abstractions are not real and the figurative is not literal…
You see people talking about abstractions as real or the figurative as literal they are not qualified .. incompetent people…
They have cognitive problems..
Like Roman Catholics think the figurative bread and wine of the communion ritual turns into the literal flesh and blood of Christ…
https://en.m.wikipedia.org/wiki/Transubstantiation
Reification error… it’s like monetarism… “money is real!”
They’re all Art degree whacked out nut jobs…
Salmo trutta is flow 5
He was flow 5 for years
Has 3 accounts on seeking alpha.
His name is Spencer Hall.
https://monetaryflows.blogspot.com/2018/06/the-nattering-naybobs-elephant-tracks.html
This is a very old blog he used to post on.
https://ymam.proboards.com/thread/10300/stock-market-plunges-told?page=2
If you think I wrote his blog you are nuts. I don't know any UK history never mind American monetary history.
Footsoldier,
You have a unique writing style. Like a fingerprint and easy to spot. Verbose and long lists of numbers in endless comments. Just like when you used to mess up my comments on Seeking Alpha. You and I go way back.
“ long lists of numbers in endless comments.”
Those are cut and paste from the other guy….
Derek is just posting this guys theories here to see what we think of them…
I haven’t really had time to delve in but at surface they seem monetarist..,
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