Why Haven't Rate Hikes Caused a Recession?

Because Higher Rates:

1) Increase the Term Structure of Prices & Future Cost of Doing Business
2) Accelerate Income Demands
3) Supply Additional Interest Income to Private Sector, Which Supports Growth

Only #MMT gets this.

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Each chart provides evidence to demonstrate the following:

Rate hikes directly affect the term structure of prices, increase future cost of doing business, Granger-cause CPI, and adds additional income to the private sector. 2/4

The Goal: Build a deep learning neural network using only sectoral balances to predict the unemployment rate.

Why?

To see if core MMT data can explain unemployment and validate a deep learning architecture for further macro & market analysis.

An MMT Research 🧵

1/11 For those who just want the results I’ll get right to the fun part:

We were able to achieve a model that both predicts unemployment 1 yr out and demonstrates generalization using only Sectoral Balances. If you want to learn what this means and why it matters, keep reading!
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It's different this time! Earlier this week I asked why the inverted yield curve, which has long been a recession indicator, seems to be so far off this time. My answer: It all has to do with where the growth originated.
1/6 During the past business cycle recessions the primary growth driver, prior to the recession, was the private sector. While endogenous money growth looks great on the way up, it’s the government sector that provides the foundation.
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What Causes Inflation?

Monetarist normies will tell you government spending & money supply, but they are wrong! Only #MMT understands this, and the data proves it.

So let’s do a little data science to see what the real cause of inflation is!

A thread ...🧵 1/10 Our first step to determine what drives inflation is to plot our candidate inflation variables against CPI (see 1/10) and take a look at the time series. It won’t require a PhD in stats to see there is a correlation between each variable and CPI. So let’s dive deeper. 2/10

Want the best Bull case for '23 one that only #MMT understands: A massive wave of billions in free $ is set to hit the private sector via interest payments from the Govt. Before we understand why this will be a + for stocks we need to understand what caused the '22 selloff 1/6🧵 What caused the selloff in 22? A collapse in government deficits. MMT gets that govt spending is private sector saving. Once govt spending reversed in late ’21 the priv sect was reliant on an already flimsy credit cycle 2/6

Loans Create Deposits – This is a core tenet of #MMT and a grossly misunderstood dynamic in economics and finance – Here is a simple balance sheet operation to understand how banks create money and a brief introduction to the effects of this process 1/5 To set up our example, lets assume I want to buy your house for $250k. To do this, I need a mortgage, which the bank creates, and in doing so will also create a new deposit for you on their balance sheet, this mortgage is both an asset of the bank, and my liability. 2/5