As we have been writing for over a year in this newsletter, the UK Government, as the issuer of the UK pound, can never run out of money. They can afford whatever is priced in pounds. There is never a problem finding the money. This leads to a natural and painful conclusion: Continuing austerity policies is a political choice....
The National (Scotland)
Modern Monetary Theory film proves finding the cash isn't the problem
William Thomson, Scotonomics founder
The problem is they believe Scotland is like a Eurozone country that doesn't issue it's own currency and thus income taxes in Scotland go into the Scottish consolidated fund and fund the Scottish government.
ReplyDeleteThey don't they go into the UK consolidated fund and then a couple of steps later are destroyed.
" Other taxes " are what goes into the Scottish consolidated fund. That then can be used by the government.
99.9% of the Indy movement think it is like the Eurozone.
As you can see here
https://robinmcalpine.org/how-the-scottish-government-could-have-avoided-cuts/
The leader of the largest independence think tank.
It's what you get when a bunch of people get together who believe in a fantasy. What they want is to be a 'council leader' in the EU council areas so they can eventually be called to Brussels and have their tummy tickled. They don't believe in nations. They believe in regions in a globalist utopia.
ReplyDelete99.9% of them don't understand trade either. They think that funds the government also.
ReplyDeleteAdd the two main issues together and then you understand why they voted to remain in the EU.
I used my own money to try and change that ... But was faced with ...
ReplyDelete" There is an Inner Party that runs things, and Outer Party who are jostling for position to get into the Inner Party, and then there was me who look at the whole stupid game with equal measures of bemusement and irritation. I walked away"
:)
99.9% of them are careerists. The equivalent of the hip hop scene in America that the Puff Diddy scandal is exposing to the world right now. People will say and do anything to try and get into the inner party.
The world needs its very own Puff Diddy scandal in economics, science, arts, history etc,etc.
ReplyDeleteHow's the $ on an oil standard looking ?
Short GBP/USD @ 1.3216. Now 1.3114
Short EUR/ USD @ 1.1125. Now 1.1037
Short AUS/USD @ 0.6785. Now 0.6847
Short NZD/USD @ 0.6244. Now O.6220
And
Long USD/CAD @ 1.3463. Now 1.3526
Long USD/JPY @ 1.4429. Now 1.4685
Long USD/CHF @ 0.8433. Now 0.8516
Told ya I wasn't worried in the slightest about the YEN.
Just watch what happens if oil keeps rising from here. The zombies that think the $ and oil are still in an inverse relationship when oil dropped over $20 since July have been eaten and continue to be eaten alive.
My positions on the other hand based on the $ is now on an oil standard. Have been completely stress free.
The zombies who still believe in the inverse relationship pre 2017/18. Can only stretch the elastic band out of whack for so long before the new reality shape back in their face.
ReplyDeleteThe 10 year rising after the rate cut has EVERYBODY confused.
ReplyDeleteNope, Brian has already dismantled the framing and narrative around the confusion.
Balan was right after putting his reputation on the line. Didn't even care what other central banks were doing.
https://seekingalpha.com/instablog/910351-robert-p-balan/6056223-move-was-called-misguided-offloaded-tmfs-and-loaded-up-on-tmvs-short-term-why
The GROUPTHINK believes it is what other central banks are doing. That is causing the 10 year to rise.
ReplyDeleteNope,
Three are distinct seasonality of liquidity flows and 8 major liquidity flow swings in a year.
https://seekingalpha.com/instablog/910351-robert-p-balan/5465685-burden-of-bullish-bearish-meme-unleash-total-power-of-compounding-and-large-numbers-laws
Or
ReplyDeleteIf I didn't have FX positions on. I wanted oil to fall to $ 50.
Then it Would have been very interesting watching what the 10 year did. Going by the yearly and 5 yearly charts.
"My positions on the other hand based on the $ is now on an oil standard. Have been completely stress free."
ReplyDeleteRight on! I've been saying this for a long time. I totally agree.
The major liquidity flow swings in a year. Is the reason Salmo Trutta aka Spencer Hall never had a losing bond market trade for nearly 50 years. Although he thought there was 6 not 8.
ReplyDeleteHere:
https://seekingalpha.com/instablog/7143701-salmo-trutta/5308783-6-seasonal-inflection-points
Until post 2017/18
He said that we are in a new paradigm and disappeared and couldn't figure out why. Very rarely posted after that.
Is it because huge chunks of these liquidity flows are now being used to support the oil price ?
Stay tuned for the next episode of soap.
"Right on! I've been saying this for a long time. I totally agree."
ReplyDeleteThat makes 2 of us in the whole MMT community Mike.
"The zombies who still believe in the inverse relationship pre 2017/18."
ReplyDeleteI'm not getting this. How can there be an inverse relationship when oil is generally priced in dollars in the first place and the US is a net producer?
Inverse relationship with what?
He’s saying before it was if oil was up the dollar was down but now it is oil up then dollar up.l. As US became net exporter….
ReplyDeleteIf trump wins then I assume oil price is down further if ROW can keep their production steady….
ReplyDeleteNothing to do with being a net exporter.
ReplyDeleteThey have put the $ on an oil standard Neil.
" I'm not getting this. How can there be an inverse relationship when oil is generally priced in dollars in the first place and the US is a net producer? "
It is just what the zombies did. They do all kinds of stupid stuff and have done for years. Look at what they do regarding interest rates. They think there is a relationship between gold and oil and gold and the $. It is ingrained in their belief system.
It is why the algo's wait on the trade balance figures.
Don't try and make sense of what they do just use it to your advantage. They are still doing their if oil was up the dollar was down strategy.
Investopedia describes it like this
https://www.investopedia.com/articles/forex/092415/oil-currencies-understanding-their-correlation.asp
The key word in that description is psychology. In other words GROUPTHINK.
Now the $ is On an oil standard since Trump's first term
Here:
https://seekingalpha.com/author/chris-cook/analysis
You take advantage of the zombie GROUPTHINK.
Just think of their psychology of the oil market Neil. Their GROUPTHINK. That has lasted for decades.
ReplyDeleteThe 5 year average and the Days of Supply, cover days and inventories.
It is all nonsense but a belief system they have.
https://threadreaderapp.com/thread/1585512974843871232.html
It's like taxes fund spending, pass the debt to our children and grandchildren. Think the 7 deadly innocent frauds or the Fifteen fatal fallacies of financial fundamentalism.
The markets have dozens of these frauds and fatal fallacies wrapped in groupthink.
If their GROUPTHINK believes oil is up and $ is down in the same way they believe interest rates up and inflation down etc, etc, etc.
Take advantage, now we know Gary Cohen, Rex Tillerson and John Shapiro at Morgan Stanley out the $ on an oil standard during Trumps first term.
https://www.macrovoices.com/podcast-transcripts/419-chris-cook-energy-markets-are-manipulated-in-multiple-timeframes
The US could stop being a net exporter tomorrow.
ReplyDeleteBut when the $ is now on an oil standard watch what happens.
Nothing. The $ will still track the crude price.
I think Matt thinks energy dominance was about exports.
ReplyDeleteIt wasn't because first of all the only way they can export oil is because they import it. It is shale in the main they are exporting because it destroys US refinery profits. Send it off around the world to other refineries.
Here:
https://threadreaderapp.com/thread/1767495168016503215.html
Second - What Gary Cohen, Rex Tillerson and John Shapiro at Morgan Stanley were actually doing was trying to take back control of the price of oil and take that power away from the Saudi's and OPEC.
"That the US shale producers have to hedge their forward production. They can’t get financing to drill more wells if they don’t do that, so it absolutely has to happen. They make that deal with an investment bank. It’s usually a cashless collar that’s negotiated at the wellhead.
But then the investment banker has to lay off some of that risk that he’s just taken on. They do that by selling futures in the futures market about two years out on the curve.
What the press tells us, what’s going on is “hedge funds” – of course, what they’re really talking about is the managed money column of the Commitment of Traders reports that the exchanges give us – they’re saying “hedge funds” are buying these contracts that are being sold by the shale guys that are hedging, or actually by the bankers of the shale guys.
Reading the pitch meetings for hedge funds that trade oil. They’re all trading the front of the curve, the first few months. A few of them have strategies across the curve, but even those are sticking to the liquid months. The ETFs are a bit generally exposed in the first year, the first strip. Even people that are trading entire one-year strips are generally trading the first year against the second year.
So we get to two or three years out, nobody present a strategy that says we buy futures contracts two and a half years out because the buy-in is good there and an extremely thinly traded market where there is no liquidity to get out of if you ever had to. So, if it’s not “hedge funds,” the way everybody wants to believe – who is it ?
And this is something – it blows my mind – on Twitter, usually if you ask a question somebody shows up who is smarter than you because they’ve just got to be in your face about how they’re smarter than you and show you up – you’ve asked the same question over and over and over and over again about once a week on Twitter, which is: Okay, if these “hedgers” are selling contracts two to two and a half years out on the curve, who is buying them? And what is their motive?
What it’s to do with is that there are people in the market who are supporting the market price. And there’s a big raft of capital in there – it’s all basically T-bills going out – in this case it would be two years – so somebody out there is essentially borrowing oil and lending money via T-bills. Okay? Somebody out there who actually has a motive in supporting the price.
Well, no prizes for whom that is likely to be, really. In my view it actually has to be the Saudis who are doing this, or the GCC (Gulf Cooperation Council), or people very close to them. Or if it’s not the Saudis deliberately, it’s Wall Street using Saudi money to do it.
I’m not saying precisely what the geopolitical motivation of this is. I do know that producers, if they can, will always support prices. And historically they’ve done it with derivatives – that’s what happened with the LME and tin – or they’ve done it with debt – people have borrowed money.
It’s all about funding inventory,. That’s what it’s all about, you know? If you’re going to manipulate the market, you’ve got to be able to fund inventory. And prepayment, prepay, as Enron demonstrated, is a means of funding inventory which is not visible to the market. Because that’s the way they actually arranged it. 70% of Enron’s revenues never existed. "
What was happening was essentially lending money over time – which is what T-bills are – against borrowing oil over time – which is what prepay is. And, essentially, what we see is it’s the use of the dollar on the one hand and the use of oil on another. It’s a swap of oil for dollars, in a sense. On a macro scale.
ReplyDeleteEnergy dominance as, basically, the US taking back control of the energy market. What we then saw was the Intercontinental Exchange came along in about 2001. And one of the key architects of that was Gary Cohn, and also John Shapiro at Morgan Stanley. Created what we know as the Intercontinental Exchange. ICE Europe (Intercontinental Exchange Europe) is what the International Petroleum Exchange used to be.
So over many, many years, we saw the market became financialized. It was essentially a creature of the Wall Street banks. Or, should we say, they were very much in control of it. But the actual pricing was European and was based on North Sea oil. So the US was not actually in direct control of the market, although Wall Street had a lot to do with it.
Saudi pricing reference, which had been for the last 15 years 20 years, back to the start of ICE, the Saudi price reference had been a weighted average of trading on the ICE Europe exchange.
That’s what Bwave was. Brent Weighted Average. And what that enabled was high-frequency trading and whatnot, backed by – particularly by funds – it enabled the price to be supported, if the capital was there to back it.
But what changed went from being Bwave to basically something closer to the physical market. And through the arb (arbitrage),, it meant that WTI was now in the position to have a lot more influence, if not lead price formation, in the global market.
We moved from a Petro dollar system to a pre pay system. Where the prepay used to involve the investment banks as middlemen between the Fed and the markets, we are now seeing funding flowing more directly in. It is, if you like, an intergovernmental flow. The $ was put on an oil standard.
China suddenly started building and creating massive oil storage facilities across China as they saw what was happening.Started talking to the Indians. They’re talking to all the Asian buyers and Put together a buyers’ club. Imagine an OPEC, but on the other side of the coin. The swing demanders.
Energy dominance wasn't about becoming a net exporter it was a geopolitical play. To get a better control of the price.
China plays the game of A 'retail' sprat to catch a wholesale mackerel.
ReplyDeletehttps://threadreaderapp.com/thread/1368682607035170821.html
Or...
The new swing demander's goes On a buyers strike and use their strategic reserves instead in order to bring down the price of oil.
Which I believe we have just witnessed since July. The swing demander's fill up their strategic his reserves at lower prices.
They put the $ on an oil standard and inflate the price via pre pay for the shale guys. Why the $ stayed strong through this whole inflationary period. Oil price goes up $ goes up, oil price goes down $ goes down.
ReplyDeleteNow when OPEC try and use oil price geopolitically to hurt the shale guys like they have in the past they struggle to do so.
If the oil price goes too high the $ stays strong with it rather than depreciating due to zombie GROUPTHINK behaviour. Who think oil price up, $ down.
The US keeps a strong $ and just releases oil from their strategic reserves to bring oil back down within a decent trading range.
We have seen all of this play out.
The reason I think so many people miss it is because they always view the lens via a domestic focus. They think the government are trying to improve the lives of the domestic economy. View economics via a domestic lens.
ReplyDeleteIt is like viewing everything through a gold standard, fixed exchange rate lens. Without realising the difference it made when we went to fiat and free floating currencies.
EVERYTHING is now geopolitical. It has been geopolitical over domestic since the fall of the Berlin wall.
Yet, many still view what happens via a domestic lens. That's why they miss a lot of what is happening and call anything geopolitical a conspiracy theory.
That's how I see it anyway.
Try explaining it without using figures of speech…
ReplyDeleteAmericans care about the price of gas at the pumps. For them, geopolitics doesn't exist.
ReplyDeleteSoaring gas prices before November election = winning!
ReplyDeleteJust look at diesel demand
ReplyDeletehttps://threadreaderapp.com/thread/1841396876379111457.html
And all people ever look at is The 5 year average and the Days of Supply, cover days and inventories etc, etc.
It's all groupthink.
" Try explaining it without using figures of speech "
ReplyDeleteWhat do you mean ?
My commentary that matches the real data charts exactly.
Or your commentary that the real data charts completely ignored ?
Soaring gas prices before November election = winning!
ReplyDeleteMeans what exactly, in a one party nation state ?
Has elections solved anything in Canada ?
If you think this guy is any different
https://m.youtube.com/watch?v=HX-5jmQplIo&pp=ygUfdGhlIGRhaWx5IHNob3cgd2l0aCBqb24gc3Rld2FydA%3D%3D
Good luck.
The Heritage Foundation will run America while Trump plays golf. Trump Is The Opposite of Who His Supporters Claim He Is.
ReplyDeleteTrump winning will drive TDS sufferers mad.
ReplyDeleteBibi Netanyahu doesn't have to worry who wins in November. Both idiots are ready to do his bidding.
ReplyDelete