The draw down of the reverse repo was so robust that indeed it led to an increase in the money supply at year end despite ongoing QT. It will be also interesting to see what the Fed says about their plans for QT. The offsets have pretty much been diminished now, they need to be careful here.
I hope they know what they're doing. But it remains a complete mystery to me why Yellen did not extend duration, when she had 3 funding windows with the 10 year under 1%. It wasn't some complex math problem for us to know that inflation was coming and for us to go to cash and sit our hands. Why wasn't she on the other side of it? What was TLT back then $170? Those bonds weren't priced rich enough?
Maybe lessons have been learned but the recent performance doesn't give me a lot of confidence. To me it looks more like they bumble along and the market forces their hand. It's hard for me at this point to view them as rational actors.
So Yellen is issuing TBills because that’s all that can be bought by money market funds. Not a good long term plan and this will distort the yield curve more. The system is very unstable.
Great piece! Saw you on stage in Amsterdam at the BTC 22, following since then. Got technical media feedback, the sound amplitude is pushing over the upper bound when you speak, you should be able to reduce 80% of it by getting more distance to the microphone. Bonus points if you use a filter (i.e. "popfilter"). Which mic do you currently use? Would love to get your sound quality to the higher levels! :)
Thank you for your free content. I find it's very educational to read you. And many of us can't afford the unlimited subscriptions model of peak Gen Z-Dot Com living.
Interesting peak behind the curtain for you:
Yellen (of all people) laid SUPPORT for the "Trumpian counter-cyclicality" you refer! ( a sign of a deep civil services backbone to US policies behind the high noise kabuki front which is highly resentful and faux-tribal).
Specifically Yellen was quoted thus: "Yellen, in a lunch address to a conference of policymakers and top academics in Boston, said the question was whether that damage can be undone “by temporarily running a ‘high-pressure economy,’ with robust aggregate demand and a tight labor market."
Seems like if it’s mostly Bills, we’re going to see inflation come up again. Excess savings and big corp are making their easy 5%, diminishing pressure on disinflation, while international has the modest bond issuance covered.
Thank you for a great analysis. I think net net the QE is pouring from one bucket into the next like a game of hide and seek; ultimately QE never stopped and the market reflects that quite well. This is doomed to calamity some day, maybe tomorrow.
The draw down of the reverse repo was so robust that indeed it led to an increase in the money supply at year end despite ongoing QT. It will be also interesting to see what the Fed says about their plans for QT. The offsets have pretty much been diminished now, they need to be careful here.
I hope they know what they're doing. But it remains a complete mystery to me why Yellen did not extend duration, when she had 3 funding windows with the 10 year under 1%. It wasn't some complex math problem for us to know that inflation was coming and for us to go to cash and sit our hands. Why wasn't she on the other side of it? What was TLT back then $170? Those bonds weren't priced rich enough?
Maybe lessons have been learned but the recent performance doesn't give me a lot of confidence. To me it looks more like they bumble along and the market forces their hand. It's hard for me at this point to view them as rational actors.
So Yellen is issuing TBills because that’s all that can be bought by money market funds. Not a good long term plan and this will distort the yield curve more. The system is very unstable.
Great piece! Saw you on stage in Amsterdam at the BTC 22, following since then. Got technical media feedback, the sound amplitude is pushing over the upper bound when you speak, you should be able to reduce 80% of it by getting more distance to the microphone. Bonus points if you use a filter (i.e. "popfilter"). Which mic do you currently use? Would love to get your sound quality to the higher levels! :)
You work is always well thought out and very useful for those of us who focus too little on the plumbing of government finance
Thank you for your free content. I find it's very educational to read you. And many of us can't afford the unlimited subscriptions model of peak Gen Z-Dot Com living.
Interesting peak behind the curtain for you:
Yellen (of all people) laid SUPPORT for the "Trumpian counter-cyclicality" you refer! ( a sign of a deep civil services backbone to US policies behind the high noise kabuki front which is highly resentful and faux-tribal).
Specifically Yellen was quoted thus: "Yellen, in a lunch address to a conference of policymakers and top academics in Boston, said the question was whether that damage can be undone “by temporarily running a ‘high-pressure economy,’ with robust aggregate demand and a tight labor market."
Google the quote for the link! Oct 14, 2016!
Seems like if it’s mostly Bills, we’re going to see inflation come up again. Excess savings and big corp are making their easy 5%, diminishing pressure on disinflation, while international has the modest bond issuance covered.
Thank you for a great analysis. I think net net the QE is pouring from one bucket into the next like a game of hide and seek; ultimately QE never stopped and the market reflects that quite well. This is doomed to calamity some day, maybe tomorrow.