The question in any financial crisis is who is going to assume the losses. In market economies, it is generally "the little people" (h/t Alan Simpson), that is, those that do not count. But ultimately the Chinese government will absorb the losses instead of those now affected, the mortgage holders and bank depositors. And cowboy capitalism will be moderated more. The Chinese government has already been doing this lately, having recognized systemic risk increasing with the current liberalization policy.
The problem arose from too much capitalism, as some of the leadership had been complaining. That is now likely to change in the direction of a more managed economy in which there is less risk allowed.
Michael Roberts sees that as potentially limiting growth but China economy was expanding at a blistering rate and can afford to slow down the pace without significant economic contraction.
While this is not likely to be sorted out overnight, it is not the collapse that Western Cassandras are foreseeing.
Michael Roberts Blog — blogging from a marxist economist
Is China headed for a crash?
Michael Roberts
Michael Roberts Blog — blogging from a marxist economist
Is China headed for a crash?
Michael Roberts
31 comments:
As per usual when world demand slows looks inward and builds infrastructure.
Normally this brings the old world out of recession. We are moving to a new set up how willing are they going to be to help.
The TGA is Yin to the bank reserves Yang. It's the bank reserves and inverse of TGA that calls the shots on equities.
The 10 year tends to rise when the TGA growth rate is faster than those of bank reserves and vice versa.
https://seekingalpha.com/instablog/910351-robert-p-balan/5755889-july-20-2022-waiting-out-normal-market-pullback-still-eyeing-mr-tks-4025-50-es-target-will
Regarding the 6 seasonal inflection points of the 10 year.
What is the market saying if the pivot comes early ?
What is the market saying if the pivot comes late ?
Or it doesn't really say anything if the pivot comes early or late ?
Live graph left in the comments section that will keep running in the background.
https://seekingalpha.com/instablog/910351-robert-p-balan/5755305-positioning-for-resumption-of-equity-bull-trend-and-rise-in-10yr-yield-re-initiate-long-index
Financial abstractions tend to crash, but as long as everyone remembers that these are abstractions, not tangible assets being destroyed, recovery should be swift.
Same theory applies to proponents of the neutron bomb.
"The 10 year tends to rise when the TGA growth rate is faster than those of bank reserves and vice versa."
That means there is a rise when there is a flow of tax to the government sector and a dip when there is a flow to the non-government sector.
A flow to the government sector is a reduction in 'spending type' money relative to 'saving type' money. A flow to the non-government sector is an increase in 'spending type' money relative to 'saving type' money.
The USA doesn't have a 'spending type' money balancing department like the UK does. In the UK the job of the DMO is to make sure that the quantity of 'spending type' money in the non-government sector is the same on a daily basis. It does this by buying and selling Shorts into the market.
It looks like the USA has a structural rigidity in the way it issues and manages 'saving type' money that is showing up as semi-predictable waves in the flow.
Remember that MMT, or at least the MMT that Warren and Bill put together, suggests that we should do away with 'saving type' money.
Yes,
That seems to be the key buddy.
https://seekingalpha.com/article/4277485-fed-watchers-should-keep-eye-on-ioer-sofr-spread
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.
Link: "SOFR: The Selected Alternative to LIBOR"
www.newyorkfed.org/...
"In the limit, as the distance between the STP and ON-RRP rates approached zero, the Fed would exercise perfect control over overnight repo rates by entirely displacing the private overnight repo market!"
But "Houston We Have a Problem"
The O/N RRPs is a large-scale liquidity draining device. It destroys money velocity. It sucks up savings. And it leads to an inversion in the whole-sale funding yield curve.
Now this next link is very, very important and the article and comments section is a must read Neil.
As you can see how they look at things and once again call it right.
Contractions In Money Flows And Market Liquidity
https://seekingalpha.com/article/3358375-contractions-in-money-flows-and-market-liquidity
They explain it and in the comments go deeper into it. What's happening is because they haven't done away with it Salmo has worked out a way to measure the flow as if they had.
Measures the flows that count and have an effect on the economy. Why his predictions have been so acurate.
The repo rate, interbank rate, FED Funds rate, interest on reserves, O/N RRPs
When they look at these things All they see is plus or minus Velocity. In the article above they even tell you what they measure as M*Vt.
Break everything down to long term money flows and short term money flows.
I'm not sure but maybe why he said to Bill and Scott that they had missed the obvious.
That is when they talk about these levers the FED uses velocity is never mentioned. When they see velocity as the super charger or break on the flows.
As these guys list every tool and put a plus or minus beside it.
This could be used as a fantastic example and another reason of getting rid of the interbank market and bonds ?
They set every dial to plus or minus velocity.
Then wait for the 10 year 6 seasonal pivots.
Look at the dials running up to it and determine how much the trading desk has to add or take away from the liquidity markets.
Predict the effect it will have.
That's what Salmo does. Very similar to Balan who has made millions doing it.
Salmo uses velocity. Balan uses the lags and the patterned behaviour of markets.
All based around the trading desk. Seasonal adds or withdraws.
"The 10 year tends to rise when the TGA growth rate is faster than those of bank reserves and vice versa."
These balances are sub accounts of total factors providing reserve balances … they are not independent..
They are a result of Treasury and Fed regulatory policies..
The ONLY reason there is a 2.2T balance in the RRP now is because the depositories don’t have regulatory authority (insufficient HQLA) to possess the 2.2T of reserve balances/deposit liabilities that the Fed created via their HQLA asset purchases…
Without RRP we would be back to September 2008 and March 2020 when they previously crashed the system… entire credit system would shut down…
This is the only reason there is balances in the RRP…
Derek what are they saying now?
iow as Fed is starting the QT and intends to reduce total factors supplying reserves ?
What are they saying is going to happen?
How can you predict the TGA growth rate unless you are the secretary of the treasury?
In 2020 mnuchin Ran TGA up to like 1.8T in October from 388b in March…
That was never announced … they increased the rate of UST issues in advance of trump getting his 2T deal with Nancy… which didn’t happen..,
So how do you front run that if you don’t have inside information? You can’t..
Here is their current public plan:
https://home.treasury.gov/system/files/136/Sources_and_Uses_May_2022.pdf
Says at end of June the TGA was going to be 800b it was 782b I guess close enough…
Says at end of September will be
650b it is now 616b
So if you believe them the TGA will increase by 35b over next 70 days.,, bank reserves should fall as they are doing the QT…
So we will have TGA increase while bank reserves reduce … what is the trade?
Oh and btw they also said they were starting the QT in June at rate if -47.5b per month and we are 7 weeks in and it’s only down 16B so be careful what you believe from these people…
Ask Balan
During 2021, PAM delivered phenomenal real-dollar Hedge Fund trading performance, the best at Seeking Alpha:
PAM's flagship Swing Portfolio, year-to-date (December 31, 2021) delivered $348,462,088.52 net profit on $11,172,813 margin capital.
2021 Annual Performance: 2971.16%.
https://seekingalpha.com/checkout?service_id=mp_1215
That's the whole point.
People just wave away it is all as mumbo jumbo and hocus pocus and BS what Salmo and Balan does.
Just seat away like a fly.
Completely ignore the actual results of the mumbo jumbo and hocus pocus which are utterly brilliant !
I didn' seat them away and thought okay let's feel dive this and see if anything will add to the MMT viewpoint. Let's see what I can learn from this.
"Never had a losing trade in Treasury-bond futures since 1979.
Nominal gNp hit 19.2% in the 1st qtr 1981, the FFR to 22%, & AAA Corporates to 15.49%. My prediction for the peak in AAA corporate yields for 1981 was 15.48% (& that bonds would bottom in Oct).
Predicted the month stocks bottomed in 82 & in 84. Predicted the 87 crash. Predicted the top in the Y2K bubble. Predicted that the top in stocks would be July 2007. Predicted the severe contraction in the 4th qtr of 2008 in January of that year. Identified the bottom in stocks as March 2009. The markets confused me only once - when the FED executed QE2 (but I nailed the bottom in the CPI in Jan 2011 i.e., 7 months before it bottomed out). "
I can confirm the ones I checked were true.
You give it a go see how you get on ?
It wasn't mumbo jumbo. Hocus Pocus it was pure Genuis. He was the first to come up with the formula.
What is he saying to do now?
The reason I post it up in the first place is so YOU can look at it and think can it add anything to what YOU do to improve performance.
Their results speak for themselves. They don't need lectures from anybody.They need a pat on the back and a well done.
Have a look
In order
https://seekingalpha.com/instablog/910351-robert-p-balan/5755305-positioning-for-resumption-of-equity-bull-trend-and-rise-in-10yr-yield-re-initiate-long-index
https://seekingalpha.com/instablog/910351-robert-p-balan/5755889-july-20-2022-waiting-out-normal-market-pullback-still-eyeing-mr-tks-4025-50-es-target-will
https://seekingalpha.com/instablog/910351-robert-p-balan/5756120-buy-back-of-gold-gc-short-hedgers-completed-initiate-long-pm-and-miners-positioning
5 year average
https://product.datastream.com/DSCharting/gateway.aspx?guid=02087357-72b1-493a-b8fb-7ec16b7b3ed9&date=20220115&action=REFRESH
Pivot ↓ #1 3rd week in Jan.
Pivot ↑ #2 mid Mar.
Pivot ↓ #3 May 5,
Pivot ↑ #4 mid Jun.
Pivot ↓ #5 July 21,
Pivot ↑ #6 2-3 week in Oct.
What he has been saying for a fortnight the July pivot is late why the bounce up in stocks happened around the 21st then hit a brick wall. Start of Aug is when we will see the pivot and the brick wall will crumble.
That's the view unless things change.
Nobody knows how long these pivots last they need to be monitored on a daily basis. Some pivots just last a few days some pivots last until the next pivot.
The stock/ Bond dumb bell.
If they just plod along.....
2023 will be very interesting watch those dates.
Mid term Zombie madness might have an effect in Nov but watch those dates next year. If I was a betting man Pivot 2 or pivot 4 next year may see a further correction downwards.
Both bonds and stocks are down so I don’t see a dumbbell…
Stocks have been rallying so I don’t see a brick wall?
Stocks have been rallying since June 15th when quarterly taxes were due…
Taxes were paid then we bottomed…
Take it up with Balan Matt.
2021 Annual Performance: 2971.16%.
Lecture him on what he is doing wrong.
I'm still learning.
Top in the $
Long gold
https://seekingalpha.com/instablog/910351-robert-p-balan/5756120-buy-back-of-gold-gc-short-hedgers-completed-initiate-long-pm-and-miners-positioning
What does that remind you of in 2016 when the FED started hiking?
Here's Mike to remind you.
https://m.youtube.com/watch?v=AFs4Bt8A33g
Confirmation of what we already knew. Why $ Milkshake was BS.
It's coming just about to appear up over that hill.
MMT told me to look out for it.
Just didn't know when. It is getting closer.
Aug ?
The longs will be stampeding all over each other as they all run for the exits.
There's a wind going to blow in August.
The garden will look different
:)
Blooming everywhere apart from the $ sprouts.
Then we get the drainage of the Garden in September and another wind in October but that wind will be cooler that could lead to frost.
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