A zillion of aggregated data from different countries and different sectors of each economy. It's the pace of change of credit stock - the first derivative of credit growth, the second derivative of credit stock.
Quick question please - with dept to GDP numbers hitting close to record levels, how do governments pay it back? Don't they need to hoodwink bond holders into buying or keeping them at a negative net real interest rate so that over time inflation does it thing and reduces the burden. Similar to post WWII to 1970-80's period.
Hi Riki, I think the ''solution'' you proposed is what governments are going for. Instead of defaulting in nominal terms on their debt, they keep real yields < real GDP so they effectively inflate away their debt burdens at the expense of savers and bond buyers.
I guess the next question becomes, what assets does money flow to to escape negative returns over the long stretch. If the USD gains momentum - becomes King$, thats unlikely to be commodities given the correlation.
Financial assets are approaching record valuations close to dotcom bubble times, so there's a perceived poor risk/reward consideration depending on how you value the forward view of stocks and despite the FED 'having your back' because anything else means economic downside with associated employment risks.
Inflation is being jawboned by the FED et al and the bond market appears to have bought the narrative, which is placing downward pressure on the PM space. Potentially some non-free market shenanigans ocurring here to keep the story "transitory" story in line - although no-one seems to be able to define time periods. I guess a rough guess is how long will it take to inflate away a large portion of the debt - multiple years!
Apart from a couple of key holdings, I am on the sidelines waiting to see what the USD does next, but its hard to get a grip on the next direction. Interesting times!
Nice piece Alfonso! Very well written, easy to follow. Looking forward to the articles to come!
Very kind words, Daniel. Thanks.
How do you calculate G5 credit impulse?
A zillion of aggregated data from different countries and different sectors of each economy. It's the pace of change of credit stock - the first derivative of credit growth, the second derivative of credit stock.
Alfonso - thanks for a great the article!
Quick question please - with dept to GDP numbers hitting close to record levels, how do governments pay it back? Don't they need to hoodwink bond holders into buying or keeping them at a negative net real interest rate so that over time inflation does it thing and reduces the burden. Similar to post WWII to 1970-80's period.
Cheers
Riki
Hi Riki, I think the ''solution'' you proposed is what governments are going for. Instead of defaulting in nominal terms on their debt, they keep real yields < real GDP so they effectively inflate away their debt burdens at the expense of savers and bond buyers.
Thanks Alfonso - I suspected so.
I guess the next question becomes, what assets does money flow to to escape negative returns over the long stretch. If the USD gains momentum - becomes King$, thats unlikely to be commodities given the correlation.
Financial assets are approaching record valuations close to dotcom bubble times, so there's a perceived poor risk/reward consideration depending on how you value the forward view of stocks and despite the FED 'having your back' because anything else means economic downside with associated employment risks.
Inflation is being jawboned by the FED et al and the bond market appears to have bought the narrative, which is placing downward pressure on the PM space. Potentially some non-free market shenanigans ocurring here to keep the story "transitory" story in line - although no-one seems to be able to define time periods. I guess a rough guess is how long will it take to inflate away a large portion of the debt - multiple years!
Apart from a couple of key holdings, I am on the sidelines waiting to see what the USD does next, but its hard to get a grip on the next direction. Interesting times!
Appreciate the Macro Compass schematic!
Excellent article! New info I haven't seen before regarding the 1 yr inflation swap and enjoyed learning it. Thanks
My pleasure. Feel free to share it around in your network if you find it interesting!
Nice
Thanks!