It also means there is little room to bail out stonk market or do stimmies or forgive student loans.
They cant ease cause inflation would skyrocket higher.
They cant increase rates cause govt cant afford that.
The relief valve is taxes.
You: "Oz, who would they tax?"
You: "Fuck.
Oz, what would that do to growth?"
Theres more.... todays swap weakened USD (UUP instrument)& STRENGTHENED opposing currencies - about every country that has a swap line with US got a stronger currency today, esp USDJPY
On this chart, when say USDJPY goes down, it means japanesa yen STRENGTHENED.
Infl in japn--
To do that particular swap, I think the fed bought USDJPY, USDEUR, USDAUD, etc...
This is also btw why corporations love globalization - when currency games result in favorable exchange rates...
india in particular comes to mind...
rn indian IT backoffice labor is DIRT CHEAP
$UUP (PINK) vs $VIX vs $US30y (purple) vs $USDJPY (YELLOW)
USDJPY strengthened (inflation in japan went DOWN)
USD weakened (inflation in usa went UP)
Now fed has room to raise rates again higher now that currency strength exported?
Notice what us30y is doing rn...
I know there is a lot on this chart - but same data (no vix) now including Michigan consumer sentiment.
Never in 20y has the fed hiked when consumer sentiment this bad.... (green)
The only time this cocktail was present was when consumers were kinda happy.
they'll need that deficit reduction amount to keep funding bidens war in ukraine....
Then, there's this.... i think i was mistaken about swap on this one. It wasnt a swap. Foreign CB's bought everything they could get their hands on cause yield is so much greater than their own.
Eventually the Fed will buy it all back with next cycle of QE...
This little mistake JPow made is gun cost u.
See,higher interest rates means it costs more to run the govt.
Who pays those costs?
U do: Thru taxes,fees,customs duties,etc
Foreigners/rich ppl ARE snapping up all this debt-hi interest pmt is a tax U will pay to THEM.
Tin foil hat time:
The fed raises rates and foreign CB's buy it all to hold on their balance sheet.
This weakens USD and strengthens their currency (IE USDJPY)
With USD weak, US can continue to raise rates.
The goal is to get the interest rate number HIGHER, not crash stonks.
Is this why company after company can report shitty earnings, and no forward guidence, zombie companies like $CVNA can rally with terrible future prospects?
Why Vol keeps getting suppressed?
And why we havent already crashed?
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I study the vix, geopolitics and currencies - trying to make sense of what is actually happening in the context of sound bites we get here or there from government.
Its hard to paint an actual picture from a single sound bite or news article.
But when you put them all together you paint a tapestry - some call it a masterpiece - others call it a dystopian hellscape.
For each point I will try to include a relevant news topic.
Lets begin.
The U.S. is not just struggling; it's in a death spiral.
Driven by hyperinflation & desperation, the government is making choices that solidify its descent into kleptocracy and civil breakdown.
Here’s the terrifying truth that is unfolding
Crypto: Not Innovation, But Capitulation.
The government, facing a worthless dollar, is now frantically trying to contain crypto by regulating it into the banking system.
This isn't forward-thinking; it's a desperate attempt to co-opt the flight from fiat before total loss of control.
Its an admission the dollar is no longer a store of value which is pretty damning for a government to turn against its own currency like this.