"Transitory" is a term that the Fed introduced. It was the basis for their initial view that the post-Covid inflation was not the kind of inflation that warranted a monetary response.
The reason that the Fed stayed the course on QE/ZIRP when monthly core PCE ran past target in early-mid 2021 was that they thought it would soon subside, and that pushing against it would jeopardize employment while delivering no meaningful benefit to price stability.
Mar 24, 2023 • 10 tweets • 3 min read
🧵Charts of real foreign exchange rates of various foreign indices. High value = expensive currency, low value = cheap currency, measured wrt real purchasing power:
(1) EAFE (INTL DM) LG: (2) JAPAN LG:
Mar 15, 2023 • 7 tweets • 2 min read
🧵"Banks create money out of thin air."
There's obviously a sense in which this statement is true, but it relies on a definition of money that can be unnecessarily broad and confusing IMO, particularly when trying to understand the constraints faced by a bank.
If it's true that, by issuing loans, banks can create money out of thin air, then why wasn't SVB able to save itself with this power? Why didn't it just lend money to itself & use that money to pay off its depositors?
Oct 22, 2022 • 10 tweets • 2 min read
On the idea of using lawsuits to stop a president's illegal fiscal actions, Ari raises a reasonable concern. 🧵with response below.
There are already mechanisms, outside of standing, for dealing w/ a large pool of potential plaintiffs. There have to be for the system to function, since, even under the current test, it's possible for an extremely large number of people to have standing on a given issue.
Jun 11, 2022 • 6 tweets • 1 min read
Of all arguments against rate hikes, the Erdogan-style "rate hikes constrict supply" argument is by far the weakest. Can't speak to the empirical evidence for it, b/c there is no evidence, anywhere, in any economy. But analytically, it's just sloppy.
Companies that are producing into critical shortages have the tailwinds of pricing power & elevated profit at their backs. Of all potential borrowers, they are the least threatened by increases in funding costs, which are a small side consideration relative to their windfalls.
May 9, 2022 • 7 tweets • 2 min read
Proposal to make MMT symmetrically-credible wrt aggregate demand management:
Retirement funds for all citizens. 100% in I-bonds. Fed specifies what % of monthly income gets paid into it, by bracket. Crucially, not a tax. Rather, "Mandatory Saving."
Funds can only be withdrawn under the following circumstances:
(1) 10K per year after age 67, or if disabled.
(2) Qualifying Medical Emergency.
Apr 11, 2022 • 4 tweets • 2 min read
Hard to tell, but the video below is a digitally-generated beauty-augmented face superimposed onto a normal person's body. Thousands of likes and simps in the comments, and the creators make money by having the character put out periodic shitcoin ads.
Here's another one. Totally different body from the earlier video, but the same digitally-generated face superimposed. A little easier to tell in this case, I think.
Apr 9, 2022 • 7 tweets • 2 min read
Volcker might not have been so hawkish today. He viewed excessive growth in the money supply as the key indicator of inflationary monetary policy. Do we have that right now?
On a YOY basis as of February, M2 is growing at 11%, the fastest pace since 1983, and faster than the average pace for the 1970s. BUT... that's primarily because of the distortion of QE.
Feb 10, 2022 • 9 tweets • 4 min read
THREAD: Want to share an excellent free resource that investors can use to evaluate and compare ETFs & mutual funds with respect to returns, sector & factor exposures, fundamental properties of the underlying holdings, and much more.
From what I've seen, there isn't anything else like this out there, on any of the free websites or at any of the brokerages. Especially the mutual fund part. Very hard to find. Morningstar would be closest, but only premium/subscription.
Jan 12, 2022 • 6 tweets • 1 min read
While I agree w/ the pushback against Warren, I wouldn't frame the point in terms of profit margins. Yes, retailers have low profit margins compared to most companies, but they also turn those margins into profit much more quickly, given their massive sales.
A more accurate way to assess the state of competition in a space is to look at return on investment. How much are shareholders getting out in profit relative to what they've had to invest into the business?
Jan 4, 2022 • 5 tweets • 2 min read
Whoa, this is a gem right here.
Audio recording, w/ subtitles, of a 1971 debate b/t Lyndon Larouche, heterodox marxist organizer, & Abba Lerner, leading Keynesian economist, who developed the underpinnings of today's MMT.
Topic: INFLATION. Buckle-up!
It's from a Lyndon Larouche youtube channel, and is connected w/ all the deeply conspiratorial Larouche stuff. But it's still extremely interesting to listen to. Not just Lerner's view of the inflation and the proper policy response, but also Larouche's. VERY heterodox!
Link to PDF at the end
The most important thing is to open & use the bookmarked table of contents. If you click on the circled areas below, in either acrobat or chrome, can easily navigate b/t charts of interest, by category. There are over 100 charts in package. Table of contents therefore crucial.
Nov 15, 2021 • 4 tweets • 1 min read
If this inflation is limited to specific items caught in supply-chain bottlenecks (and a lot of it is), it should not only be transitory under the Fed's definition, but also reversible, as the bottlenecks clear.
Are we going to pay 20% more for appliances forever, simply because certain input parts were in shortage for awhile? If so, who is going to collect the associated windfall, and why will that windfall be protected from market forces?
Nov 13, 2021 • 23 tweets • 4 min read
THREAD: Follow-on comments about inflation & political strategy, & a note on MMT.
👇👇👇👇👇👇👇👇👇
The most common response that I got from the thread about inflation is that corporations are just responding to market signals. They have a lot of pricing power right now and they're taking advantage of it, as they should in a capitalist system.
Nov 12, 2021 • 20 tweets • 4 min read
THREAD: Inflation, Inequality & Political Strategy
When prices rise, someone pockets the gain as nominal income. In this inflation, who has that been? Well... who do you think?
You don't need to look at any data to find out. Just look at the stock market.
Different ways to measure, but on Domestic GVA basis relative to pre-covid (Q419), abt 60% of the inflation has gone to profit (ex IVA & CCAdJ), and 40% to labor. By labor, I don't mean hourly wages per se. I mean total labor compensation paid, including via any new employment.
Oct 9, 2021 • 5 tweets • 2 min read
Agreed, w/ caveat. Absent more fiscal, we will go back to the old regime in couple yrs. If we do, there will be new calls for fiscal. Probably overdone, given MMT's influence. Result = back & forth, w/ problematic but transitory inflation as new place the pendulum can swing to.
Fed is operating on a self-fulfilling "expectations" model of inflation that is at best unreliable & at worst wrong. Question is, what happens when Fed realizes? Do they stop caring about inflation altogether, since most fiscal inflation is transitory on a long-enuf time horizon?
Aug 4, 2021 • 4 tweets • 1 min read
Wouldn't make much of a dent in the numbers, but I wonder if pfizer/mrna could create an ultra-low dose version of the vax for those w/ pre-existing issues that are hesitant, with the patient then increasing up to a normal dose if no adverse rxns.
Difficulty w/ medicine, & biology in general, is that it has weak analytic tractability. Only way to confidently determine what will happen is by experimenting, perturbing the system, seeing the result. But then, if adverse event occurs, find out after the fact--too late.
May 8, 2021 • 5 tweets • 2 min read
THREAD:
AAPL is giving the public something REAL in exchange for the money that it's drawing in as income: the ability to connect to the internet and watch TV on a marvelous device. With BTC, the public isn't getting anything even remotely similar...
What's happening instead, is that a bunch of people, who've ALREADY loaded up on BTC, are trying to convince everyone else to adopt them as a new currency. A pure ticket swap, red for blue, w/o any value creation behind it. That's a con.
Apr 4, 2021 • 13 tweets • 2 min read
A powerful insight from the real Jesse Livermore:
"Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight... But being wrong–not taking the loss–that is what does the damage to the pocket book and to the soul.”
THREAD: 👇👇👇
Why does taking a loss lead to eventual peace of mind? Why does continuing in a loss lead to continued anxiety? The answer lies in the respective impacts on ATTENTION.
Mar 15, 2021 • 14 tweets • 2 min read
Thread: We often assume that the consequences of excessive fiscal stimulus will show up in the form of price inflation. Usually, but not as a matter of logical necessity.
A thought experiment to illustrate...👇👇👇
Suppose that an economy has price controls that are perfectly designed & perfectly adhered to. Those who violate them get the death penalty.
Jan 27, 2021 • 5 tweets • 1 min read
WSBers seem to think b/c the short interest is > 100%, no longs will have to hold bag here. If everyone cooperates in the squeeze, everyone will eventually be able to sell--specifically, to the covering shorts. But as others have pointed out, that's based on big misconception...
Suppose there's 1 share of stock, you own it. I borrow & sell to X. I'm short, you're long, X's long. The # of shares shorted (my single one) as % of issued shares (your single one) is 100%, yes. But there are two long positions in the mkt that I can buy back from, yours & his.
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