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Luke Gromen Profile picture
@LukeGromen
Apr 25 • 3 tweets • 1 min read • Read on X
When I see this chart, I see that Hitler movie meme in my head, with Hitler saying "As long as Central Banks keep growing UST holdings, the US fiscal situation will be fine", followed by his general nervously saying, "Uh, sir...global CB's stopped growing UST holdings in 2014."Image
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More from @LukeGromen

Luke Gromen Profile picture
Mar 12
Fed screwed up by not letting inflation run "Higher 4 Longer" in 2022 to get debt/GDP back to 70-80% before hiking, b/c rate hikes on debt/GDP of 120% eventually start adding to inflation👇

1/ 🧵...
2/ To stop inflation at this point, the Fed would need to cut rates to 0% & balance the Federal budget, which would trigger a 7% of GDP decline.

This would be a bigger GDP drop than the GFC, except with no bailouts for anyone this time...just stand aside & watch it burn.
3/ There are two major problems with this:

a) The Federal budget is NOT the Fed's purview - Fed has no say over the fiscal side.

b) A 7% drop in GDP from 7% of GDP fiscal cuts would drive the fiscal deficit to RISE >7% of GDP as receipts fell & countercyclical stabilizers rose.
Read 4 tweets
Luke Gromen Profile picture
Jan 9
This ceases to be an intellectual exercise once you realize:

a) US min. wage was 5 silver quarters ($1.25) in 1963

b) Those 5 silver qtrs are worth $25 now

c) US CPI calculations say that $1.25 is only worth $10.81 now

d) The $14.19 difference☝️has gone to the US top 10%

e) Labor share of corporate profits is near multi-decade lows

f) US political dysfunction is at multi-generational highs, driven in no small part by the highest income inequality in nearly 100 years.

h/t @truflation
2/ This is why I always crack up when people say "Gold isn't used for anything productive", or more recently, "BTC isn't used for anything."

They're used to prevent the state from stealing your finite time, your finite lifetime, from you.
3/ If you think saving your finite lifespan from being stolen is useless, I'm happy to offer you a job at FFTT, where I will pay you 5 million dollars per year, payable at the end of 5 years.

At the end of 5 yrs, I will hand you 25 million Zimbabwe dollars & tell you to GTFO. ;)
Read 4 tweets
Luke Gromen Profile picture
Jan 1
"For 10+ years...Ivy League economists, former US secretaries of treasury, transportation, & labor, Congress...argued US factories were 2x as efficient today as they were 3 decades ago..."

"It turns out that Trump was much closer to being right than Wash DC, NYC, & Cambridge" 1/Image
2/ US policymakers could have cross-checked their analysis that it was all "automation" by watching inbound container volumes at US ports, but chose to ignore the inconvenient message (to "free trade" dogma) contained in record inbound container volumes.
qz.com/1269172/the-ep…
3/ In the 6 years since this article has been written, some progress has been made, including the early makings of industrial policy by the Biden Admin.

But it has not been enough, fast enough, and continues to tiptoe around the core issue that as yet remains unresolved:
Read 6 tweets
Luke Gromen Profile picture
Nov 29, 2023
Foreigners that owe USD debt cannot print USDs...

...but foreigners do have a $50T (gross; $18T net) "USD piggybank" they can tap to acquire needed USDs any time the USD gets "too strong."

This is why the UST market keeps "dysfunctioning" every time the USD gets "too strong."
Image
2/ This is what the "Let's weaponize a stronger USD!" advocates continue to miss.

You can only "weaponize a stronger USD" if doing so does not threaten to blow up the UST market, which requires low debt/GDP & low deficits/GDP...& the US has neither low debt nor low deficits.
3/ In summary: Here is a picture of the implications of "weaponizing a stronger USD" when foreigners have a $50T "USD piggybank" to acquire USDs any time the USD gets "too strong":
Image
Read 4 tweets
Luke Gromen Profile picture
Oct 9, 2023
Another symptom of "US Dollar Dutch Disease"

As the "Saudi Arabia of money" (link), we can easily produce more USDs, but if you need manufactured goods in large quantities, we can't help you.

"USD Dutch Disease" has become a threat to US defense readiness.👇

2/ The cure to "USD Dutch Disease" is simple, but not politically easy:

Replace USTs as the global primary reserve asset with a neutral reserve asset that floats in all currencies (ie, gold, or maybe someday, BTC.)

This would require the Fed to buy up much of the UST market.
3/ This action would crush the UST market on a real basis (thank you for your donation to reshoring the US defense industrial base, long-term UST holders!) but set off the biggest US and global inflation and investment boom since the immediate aftermath of WW2.
Read 6 tweets
Luke Gromen Profile picture
Aug 20, 2023
This chart shows the moment markets began discounting that Fed rate hikes would quickly push the US into fiscal dominance. The market's view was effectively confirmed by:

a) March 2023 US banking strains, &

b) the Fed's response to those banking strains.

Via @BobEUnlimited Image
2/ For this divergence to close, Fed needed only to stand aside & let unsecured depositors at SVB, etc. lose 100% of their unsecured deposits, & then continue to stand aside thru the ensuing bank run, equity mkt sell-off, & severe global recession that likely would've followed.
3/ That the Fed would not or could not stand aside (again - as in Sep-19's repo rate spike & Mar-2020's off-the-run UST crash) amounted to the Fed telling markets via their (now thrice-repeated) actions "The US is in fiscal dominance."
Read 5 tweets

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