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‘Monetary Stupidity Reigns’: Macro Tourist Delivers Epic Rant Amid Panic Bond Rally
Read more from The Macro Tourist
OK, this is going to be a long one and it's sure to p*ss off a great many folks, so without further ado - let's do it! Make sure you hang on! It's going to be a bumpy ride.
This morning we got a stupid "just-get-me-into fixed-income" rally. Bond desks look like Black Friday at Best Buy. The US long bond future is up 2 handles. The German 10-year bund is ticking at all-time low yields of minus 65 basis points.
Now the bond bulls will say this was preordain
It certainly is a gong-show. It’s as if there was a pile of $ trillions sitting on the floor, and everyone in the room running around in a panic worrying about not having enough to fix the roof. It is nothing short of insane. It is almost as if the rich want everyone else to lose so they will feel even richer (a long as the rest lose more than they do).
So in this article https://heisenbergreport.com/2019/08/06/macro-tourist-presents-the-most-important-chart-in-the-world/ you were blaming Powell for starting the global slowdown. But now the issue is an over reliance on monetary policy?
It’s called fiscal responsibility and staying in ones means. They should not borrow any money to pay for that failed climate control package I read about. What a waste of money if they did it.
The U.S. Fed and Treasury should be SELLING all their U.S. Bonds holdings take every bid unwind all that 4 Trillion of QE as fast as they can so they can save the cash for a rainy day and buy it all back when yields hit 6%. Even Greece debt yield’s are low ****** INSANE
Re: “Yet the idea governments shouldn’t spend money to INVEST in infrastructure and their people when there is a clear lack of end-demand is bonkers”
The biggest driver since the Great Recession (maybe well before that) has been a lack of private investment, by corporations that are literally stealing “our” future, with insider compensation. That type of piracy leaves corporations weak with less and less future value. It’s the main driver behind low wage growth and low GDP growth and it’s also the reason we all have more and more wealthy people sprinkled among the tsunami of people around the globe tethered to poverty. The lack of private investment is a catalyst for social and political winds and it is destabilizing and destructive. Nonetheless, should governments step up to the plate and INVEST in infrastructure, yes, obviously, but at what expense? Turning back the clock 10 years, the Too Big Too Fail Pirates were all bailed out and then they hoarded their loot, while infrastructure crumbled. If we allow government to give lotto money and free rides to crooks, we end up where we are again and again because of greed and corruption.
FYI: DeLong and Summers (1991) found that the post-World War II cross-
country dataset contained an extraordinarily strong correlation between
growth and private investment in machinery and equipment. Public
investment by state-owned monopolies did not do it. Investment in
structures did not do it. The correlation was very strong in OECD-class
and middle-income economies.
That tidbit has been updated by an Irish economist:
“The absence of spatial correlation in the fitted residuals raises the possibility that the factors that lead countries within a region to follow similar growth paths work through the rate of equipment investment.
“
The point is well made with regard to Germany. With negative rates, budget surplus, downturn evident, they should spend and fast.
For the US, whether it should spend fast, it won’t.
– Political gridlock until Jan 2021
– Mismatch between “shovel-ready” infrastructure projects and “most important to do” infrastructure projects. You can get a road resurfaced pretty quickly, to build a major bridge or a new light rail line takes 5+ years.
– Federal deficit already $1.3TR and is set to balloon to >$2TR in a recession
– Populist social spending proposals (healthcare, student loans, education, etc) higher priority for electorate than infrastructure projects
I think the US won’t have infrastructure spending stimulus until 2021 and then it will be limited in size and slow to ramp.
According to M.M.T., if the German government is running a surplus of 1.5% of G.D.P., that means everyone else is running a deficit. Maybe the Germans are the real deadbeats…
Bob Denver is the only celebrity autograph I ever got, 1965 at the L.A. County Museum of Art, he was with his wife and baby in a stroller. I was looking at an outside sculpture installation, alone, when they strolled up. All I had was a Wrigley chewing gum wrapper that I unfolded. He had a pen. We all laughed.