Thread by @SantiagoAuFund

Like many others, I watched the interview with @RaoulGMI and @hendry_hugh with great interest.

If you work in macro and don’t find a convo between these two interesting you should probably find a different line of work 😅

1/

One of the parts I found most interesting was Hugh bringing up Princes of the Yen.
It’s a great book by @scientificecon and summarized well in this video.

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The reason I think this is of great importance is the implications of merger of Fed and Treasury and introduction/rollout of MMT/fiscal spending in the months/years ahead

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What Japan did post WWII was print money and then direct/mandate that the banks give a certain amount of loans (quotas) every quarter. In other words, loan growth was set by government mandate, not by market demand.

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Now think about this in conjunction with the need to establish new US (or US friendly) supply chains so that we are no longer reliant on China.

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It’s basically a war effort type economy done during non war time. The capital is provided, the establishment of channels is demanded, and both the production (manufacturing) and profits are maintained within the domestic economy. It’s a closed loop.

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Combine this with my idea of capital flowing to the US, and the work of @profplum99 on the simple passive led algorithm dominating the stock market of “if cash, the buy”, IMO is a formula for US equities to rise higher than many think possible.

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But I don’t think it will be easy. And I think the Rest of the World will melt down. And the friction between rising US assets and falling International Assets will create great volatility.

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This is the doom loop that @RaoulGMI speaks of.

And possibly the rising equities alongside rising volatility that @hendry_hugh speaks of.

Going to be fascinating to watch...