1/13 THE FUNDAMENTAL ORIGIN OF CREDIT: HUMAN RELATIONSHIP OF TRUST
AND WHAT THE CURRENT ADMINISTRATION HAS DONE TO THE UST "CREDIT" (PART I)

The definition of credit by henry Thornton 1802. The fundamental principle of confidence. @rsrindy 2/13 The notion of confidence and sense of justice among credit partners.
There is nothing “just” in threatening to confiscate land from an economic area of a tiny country (Danemark) which is lending money to you and trusted you.

1/9 Precious Metals:
It stinks more than you think,
Let's stop & think for a minute.
What was happening in markets?
From Feb 21st the Nasdaq was already in trouble while
the Precious Metals Gold and Silver were ramping.
D-I-V-E-R-G-E-N-C-E
@DerivativesDon 2/9 We have notorious velocity problems with an insolvent Fed, and a quasi fiscal deficit. Meaning that the Fed has to pay Banks for not using reserves. IORB..
That's a sterilization short-term but inflationary long term.
A QFD as explained by Rodriguez at the World Bank is a very nasty condition of sterilization costs
documents1.worldbank.org/curated/en/465…

1/6 FINAL THOUGHTS ON TARIFFS 🤔,
Let's start with MV=PQ

MV is not affected in principles by tariffs.
That is the quantity of means of circulation is not increased by tariffs, nor should V, the velocity (albeit inflation expectations)

https://twitter.com/DerivativesDon/status/1907389389837119727

2/6 What is interesting is on the other side.
PQ, or GDP
Alright so here we go;
GDP=C+I+G+(X−M)

While consumption C in units will decline on imported good, the trade deficit (X - M) may shrink due to reduced imports.

1/24 The commonly accepted view is that during a recession, long bond yields fall. If you subscribe to a monetary dominance perspective, this is absolutely true, as verified over the last couple of decades. How about since 1731? 2/24 However, if you have experience trading emerging market bonds, you may have some doubts about the extent of the decline due to fiscal dominance.

1/6 Tracking the China Hongbao (red envelopes)
The hongbao bodes well for retail results in China in Q1 2025 2/6 Reasons for the Increase in M0 Supply

a) Seasonal Cash Demand:
During the Chinese New Year (Lunar New Year), there is a surge in demand for physical cash. People withdraw large amounts of money to give red envelopes (hongbao) as gifts to family, friends, and employees.

b) Business Transactions:
Many businesses distribute year-end bonuses and settle payments before the holiday, leading to a temporary spike in cash circulation.

c) Holiday Spending:
Increased consumer spending on travel, retail, and entertainment during the New Year celebrations leads to higher cash withdrawals.

d) Temporary Liquidity Adjustments:
To accommodate these demands, the PBOC injects liquidity into the banking system by increasing the M0 supply.

1/21 "The Bitcoin Act" is as usual with the name of the bill, completely deceptive, devious.
The Bitcoin Sovereign fund bill is neither
disguised Gold revaluation,
nor USD devaluation.
It’s simply
Theft of Central bank’s Gold by the Gov. (PART I) 2/21 We will explain separately in other posts the process of
a) Gold revaluation with archives (Kemmerer 1920) in a separate post
b) Currency devaluation by buying Gold with (Thornton 1802) in several posts (there are 3 versions of the explanation)

1/12 THE RISK-FREE RATE JOKE
(We need a detour to explain how the Bitcoin bill is, in fact, the Federal Reserve’s gold theft by the Gov, and that this bill has little to do with Bitcoin) 2/12
You often hear from posters on Twitter that government bond yields represent the risk-free rate and that it is natural for all other credit securities to trade with a credit spread or gradient. This is entirely false—propaganda and a legal artificiality.

1/25 What is the impact of Gov spending on corporate profits?
The simple explanation of the reduction of gov spending is this.
And agreed with @EdgeGroup. Let’s avoid charlatanry if possible, and keep it simple.
Now let’s do the “complicated” version.

https://x.com/GraphCall/status/1901760558833009066

2/25 It’s not really complicated , so let’s use the national accounting entries. It’s still not hard science.

1/17 SWAP SPREADS AND BANKING

Swap spreads in Europe have gone quite negative since the Bundeswehr has decided to re-arm in Germany. 2/17 Hopefully they shift a lot of that budget to energy infrastructure to Coal, Nuke, Solar (where it makes sense like Andalucia Almeria), Wind (when there is a lot of wind, since the amount of energy produced by a Wind Mill is a cubic function of the speed of wind and also…

1/20 WHAT IS GOING ON WITH THE FED? (WELL, PEOPLE SHOULD ASK THE QUESTION TO THE TREASURY, IN FACT)

Well, the Fed was not in control of inflation with fiscal dominance. 2/20 The inflation came from the pump of excessive spending from the government, leading to an overspending-induced DEGEN-PUMP, with 40% of Russell Index companies unprofitable.

1/8 So, to operate in capital markets.
Don't re-invent macro, it's stupid.
Cheat.
When the greatest say this other guy is fantastic, grab the book. It will be fun to read and instructive.
You'll save yourself "Macro wheel re-invention".
Be lazy. (read a lot) 2/8 If you can find a listed company that deals with small business lending exclusively, it's a treasure of information to find out what's going on in the credit and business cycle.
There are 3 phases
a) Crisis
b) Liquidation
c) Renewed prosperity.

1/9
It’s not unusual to have distortion in the Price of Gold when there is a drain.
In 1797 secrecy committee (in that period was rather an internal drain than an external drain) explained what happened when Gold was drained.
(Tooke 1826) 2/9 You had the same situation in the 1960s with off market price above official market price, but at the time it was a situation more similar to today that is an external drain on the USD, basically countries not keeping their FX as “reserves” but dumping instead.

1/9
So why is @Elonmusk agitating in Brazil and elsewhere.

Before $BYD came to Brazil, electric cars were for the rich. "para rico"

As the introduced the Dolphin (Local name of the "seagull", the competition had to reduce the prices by 50K, 60K, 100K reais (guess who is the competition)
2/9
When they introduced the Dolphin mini, a car which is around the price of popular car at 115K reais (8% above, but next will be produced locally so it will get at par)
this is what happened... @garatupan

1/4 🚨 Malpass was THE great guy at Bear Stearns, (we were clients on the risk arb desk).

#FEd is the systemic entity today
NOT the commercial banks.

a) No real deflation post 2010, the Fed was repressing the rates getting the gov in a false sense of security on cost of borrowing. 2/4

b) There is a large hole in the Balance Sheet of the #Fed w/ an inverted balance sheet & a quasi fiscal deficit. That what is "this is endangering the Dollar"

1/19 Local Currency trading results in Gold Spread
(disclaimer: not long PMs rn)

Reposting the original post (hacked) from Mid 2023 because it turns out that the Gold Arb really DID happen. (next post stay tuned!)
Play the recording 📺
Here 👉 link.graphcall.com/local-ccy-trad… 2/19 This the First variation in explaining Gold premium / Gold discount in connection to trade. Just like in Mathematics there are plenty of ways to solve the same puzzle and Thornton is playing with all the variations. (A true master)

1/19 TARIFF: THE END OF 40 YEARS OF CONSUMPTION-DRIVEN GDP SUBSIDIZED BY THE GOVERNEMENT

Tariffs effectively decrease the purchasing power of the USD for Americans. And it’s a solution. Wut? 🤯

The Free Lunch of Excess Spending

For the last 2 decades at least there was a bit of free lunch of too much spending versus income in the US. And when that happens, it means that some dollars are sent abroad and if foreigners are willing to do vendor financing, then the Gov juices the economy by doing deficit spending with a free card. 2/19 The Illusion of Low Interest Rates

If rates are low it looks like a “miracle” , or free lunch., that is Americans consume far beyond what their productivity should allow them to do.

Jacques Rueff and FX as Reserves

As Jacques Rueff explained this is FX as reserves, and recycling into UST security can continue for as long as there is no impact in the credit base of the US.

1/9 THE CHURCHES ARE BURNING

If you look at the history of bubbles in the West,
it seems to follow a pattern.

Western investors invest like they go to church.
It's always the same story basically.
They want a messianic story. 2/9
____ is revolutionary, it will change the world
forever, it is the savior of humanity, that
will make the world a better place ever after.

Translation?
GREED
(but with some lipstick on that agmygdala/limbic pig so that your frontal cortex doen't rebel & go into dissonance)

1/5 Drums of war fading (for now)

Investing means observing:
It is undeniable that what Donald Trump said should spook the Bond raiders, and those long soft commodities and long precious metals or at least put them in a wait and see mde. 2/5 Donald Trump on Bolton.

1/8 War and Prices, EPISODE II:
Price bifurcation and burden on lower classes.

While it seems that war drums are abating, it is important to remind what wars (and the end of them) produce on price levels.
- bifurcation of prices
- change in allocative mix
- high inflation on items at the bottom of consumption ladder

Here is what Ewdin Kemmerer wrote in 1920
CHANGE IN ALLOCATIVE MIX 2/8 Kemmerer explains that war spending creates a significant amount of bifurcation between basic necessities and discretionary spending.

Interestingly the allocative mix was discussed by the BIS annual report in 2024, as a source of pressure on wages. (wagers trying to restore their mix and impact on services prices)

1/11 PRICES DURING WAR: EPISODE I
Francis Baring 1797: Indispensable commodities hold value better.

The reason why soft commodities outperformed Gold during the Napoleonic wars and durig the Civil war is not because they are scarce but because they are indispensable.
Read : Inelastic demand 2/11 Francis Baring proceeds to compare Wheat/Corn to the monetary abstraction of the day BoE note. We will consider soft commodities vs #BTC (scriptural monetary abstraction) later.

1/ The theft of the post Volcker by the Central Bank and Fiscal "Shamans"

So, in a previous post, we discussed the question of the permanent LBO wealth gain that is typically great with a war condition. We argue that it was a transfer because someone is paying for it.

https://x.com/GraphCall/status/1878565868625436760

2/ Today we explain who is paying for it.

We have discussed the benefit of the war economy for the leveraged investors. And today, we have a Treasury secretary (Bessent the hedgie) who benefited handsomely from those policies. AND the #Fed’s Chairman comes from LBO!!!