Operating at the Intersection of Technology and the Capital Markets
Tag: fiscal deficit
The U.S. economy is resilient in large part due to the fact that the Federal Government prints money that is then allocated to citizens through various "Income Security" programs. People then spend that money which is recorded as GDP. These programs are divorced from productivity which is why they devalue the Dollar and cause inflation … Continue reading Why Is The U.S. Economy Resilient?
Yields are moving higher, liquidity is leaving the system and asset values should fall. Over time, we believe that investors will focus less on Fed monetary policy and more on fiscal policy. Fiscal policy is the primary catalyst for U.S. economic activity (mostly bad), the Fed simply reacts. This week the Fed allowed $42.6 billion … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
The fact that the U.S. is technically insolvent is enough reason for fixed income investors to want a higher yield on 10-year Treasuries. However, even if you are more sanguine about the United States' financial position than I, you ought to want a higher 10-year Treasury yield. Since January 1990, the spread between the 10-year … Continue reading 10 Year Treasury Yields Will Move Higher
"The Edge of Reality" is an Elvis Presley song that was recorded in 1968. The song's title fittingly describes today's distorted capital markets and fiscal largesse. The capital markets have not behaved in a normal, logical fashion since the Trump and Biden administrations pumped some $10 Trillion (40% of GDP) into the economy over the … Continue reading The Edge of Reality
We took a little victory lap yesterday as it relates to Treasury yields. I am 100% certain that the Fed will lose control of the yield curve. I would bet my life on it. I have never been more certain of anything in my life as it relates to the capital markets. Yields are going … Continue reading The Fed Will Lose Control of The Yield Curve. A Return To The Gold Standard Would Restore Fiscal Discipline Overnight.
The fact that Fitch downgraded its U.S. credit rating from AAA to AA+ is a joke. Technically the United States is insolvent. We are running a $1.6 Trillion deficit fiscal year-to-date with 8 weeks remaining in fiscal 2023. We are able to run deficits year after year because the Dollar is a reserve currency and … Continue reading Fitch’s U.S. Credit Downgrade Is A Joke
Absent this Bank Term Funding Program bailout the U.S. banking system would be self-correcting at a much more rapid pace. This $2 Trillion bailout creates moral hazard in the same way that 13 years of QE did, which is to say that QE created an Executive class of Commercial Bankers who do not know how … Continue reading Weekly Update: Bank Term Funding Program
The equity market is too sanguine. Things feel too still. Could this be the calm before the storm, or, will another round of Fiscal stimulus and Fed easing abort the storm on the horizon, fiscal debt and inflation be damned? It is difficult to make a call on the fundamentals whether it be the price … Continue reading Nothing To See Here. Or Is There?
The capital markets are bonkers having been thrown into contortions by perverse fiscal and monetary policy. Up is down and down is up. The Capital Markets remind me of Bizarro World from the Superman comics where everything is backwards. FISCAL POLICY: One could argue that fiscal policy has been working against Americans since the days … Continue reading The Capital Markets Are Bonkers
Washington politicians, Treasury officials and Federal Reserve bankers ought to think twice about further leveraging the U.S. Economy. Bailouts and Government subsidies are not the solution to building a robust free market economy (nor to winning elections). What do we have to show for the massive debt issuance that takes place each year? Moral hazard … Continue reading Diminishing Public Debt Returns
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