1/One interesting thing that I've learnt from @profplum99 through this internship is that Paul Volcker wasn't the "savior" everyone makes him out to be.

We saw demand driven inflation through a massive increase in the workforce (baby boomers entering + Civil Rights Act enforced)
2/When you have this permanent boost in demand, the only way to lower prices is by increasing the supply.

Yet, Volcker raised the cost of production by increasing interest rates (less borrowing = less investment by corps = less supply as rates went up).
3/This could only be resolved by the US running a massive current account deficit, importing the difference.

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More from @elite_investor

12 Jun
1/Time for another thread!

Today we are going to look at what causes sovereign debt crises, through looking at 2 of the most important ones of recent times to try and develop a framework for identifying them beforehand.

Let's jump right in!
2/The three debt crises that will be covered are going to be Russia in 1998, and Argentina in 2001.

They both had some similar characteristics. This thread will explain them.
3/The Russian debt crisis of 1998 did not just lead to a debt default, but also to a devaluation of its currency.

You see, the Russian economy is highly dependent on the export of natural resources, especially that of crude oil and metals.
Read 25 tweets
5 Jun
1/Time for this week's thread!

Today we're going to look at the story of the Japanese bubble of the 1980s, along with the causes and consequences.

Grab a cup of coffee and let's dive in 👇
2/During this bubble we saw rapid increases in asset prices, an overheated economy as well as rapidly growing credit.

In fact, people say the rises in asset prices were related to the ever growing amount of credit in the economy.
3/So let's lay the backdrop for Japan. The bubble started roughly in 1986, and lasted till 1991.

Before this, Japan had suffered a recession in 1985-86 driven by the appreciation of the Japanese yen. This was called "endaka" (meaning "expensive yen") recession.
Read 27 tweets
29 May
1/Time for another thread! Today we will jump in and look at how currency pegs work, how they break and what lies ahead for the Hong Kong Dollar (HKD) peg.

Breaking pegs is one of the most exciting parts of speculating in currencies!

Let's dive in! 👇👇👇
2/A peg is simply when a government or a central bank decides that the country's currency will trade at a specific exchange rate against a foreign currency (or basket of currencies).

If the Bank of England decides that the GBP should trade at 1 GBP =1.20 USD, that is a peg!
3/Why do governments use pegs?

Pegs tend to bring about (temporary) bouts of stability, especially in the middle of high inflation. A good example of this is Chile.

In 1979, Chile decided to peg its currency at 39 pesos to 1 USD.
Read 27 tweets
22 May
1/Thread time! In this thread I will explain why the gold standard is an absolutely terrible system, and why a bitcoin standard is no better.

Again this is a case against bitcoin, not the entire digital assets space.

Gold Standard: Walking into Depressions since 1929.
2/Let's first tackle the myth that the gold standard provides stability of any sort. The gold standard (as much as in theory we'd like it to) does not control or stabilize inflation.

Prices have been much more stable since 1971 than before 1929:
3/Another part of this stability argument comes from the annual GDP or GNP growth rate. There is no stability under a gold standard whatsoever:

Here's the chart. Once again, we have been better off since 1971 than before 1929:
Read 26 tweets
16 May
1/I was requested last week to profile @AlderLaneeggs short of Lernout & Hauspie. A very exciting and interesting tale.

@John_Hempton called it one of the best stock picks he has ever seen.

Time for a thread 👇
2/Lernout & Hauspie Speech Products (L&H from here on) was a Belgian maker of voice/speech recognition software, and other gear.

Rocker Partners (Marc's hedge fund) had been shorting the stock since 1998.
3/They had a speech-to-text software, which was absolute garbage. It only worked 15% of the time, which Marc discovered.

Even the salespeople at big retailers told him the stuff was absolute rubbish.
Read 25 tweets
5 May
1/PSA: Quick warning to ignore any charts that involve things divided by the M2 money supply or the Fed's Balance Sheet or some other monetary aggregate.

This is a whole deal of dodgy hogwash.
2/The assumption that stock returns haven't kept up with all this "printed money" is wrong.

The CPI or any other official inflation number hasn't been high at all (it's been pretty much under 2% over the last decade).

So people try to make up new rubbish metrics of inflation.
3/M2 in general is useless. It doesn't measure "money-printing". It also doesn't represent inflation.

Revenues>costs for businesses and households to survive and thrive. So all we need to do is look at the cost of living.
Read 6 tweets

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