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Daniel Baeza Profile picture
Daniel Baeza
@dbaeza13
On a mission to democratize financial knowledge one thread at a time Quiero democratizar la información financiera para que todos entiendan lo que pocos saben.
3 subscribers
Oct 29 • 8 tweets • 3 min read
When commercial banks buy T-bills, they don’t create money in the same way as they do when issuing loans to private borrowers, but there are similarities in the underlying mechanics.

A 🧵 on how commercial banks’ purchase of T-bills contributes to debt monetization. Image 1. Loans:
When a bank makes a loan, it credits the borrower’s deposit account with the loan amount, effectively creating a deposit (new money) out of nothing.

This is direct money creation because it increases the total money supply in the economy.

Aug 2 • 5 tweets • 2 min read
Passive Investing is a ticking time bomb

Current trend of passive investment inflows is unsustainable. Mechanical bid from passive managers (ETFs) inflate stock prices artificially and reversal could cause a significant market downturn.

🧵on passive investing
Thanks @profplum99 Image Idea behind passive investing is that it doesn't move the market much, market is more sensible to how active investors are trading. However, passive investing has become so large that it's no longer passive.

Passive funds closed 2023 with more assets than active funds. Image
Jul 15 • 6 tweets • 2 min read
La generación Boomer vivió una época en la que era más fácil crear riqueza y ahorro. Descubrieron que el (ab)uso de deuda los beneficiaba y lo aprovecharon.

Hoy piensan que las generaciones más jóvenes son débiles y poco trabajadoras.

Un 🧵 sobre lo fácil que les tocó a boomers Image La productividad y salarios crecían de la mano hasta 1972 donde los salarios se estancan.

Cómo se contrarrestan salarios estancados? Fácil, con deuda. Image
Jun 10 • 14 tweets • 4 min read
Para entender sistema monetario es necesario saber que existen diferentes formas de dinero y que son creados por 3 entidades:

1. Gobierno
2. Bancos comerciales
3. Bancos Centrales

Un 🧵sobre cómo funciona la creación de créditos de bancos comeriales. Image Sistema intenta evitar que poder de creación de dinero sea controlado por gobierno.
Creación de dinero está dominada por oligopolio privado que compite por negocios (bcos comerciales).

El sistema enfocado en emisión de dinero privado es inestable y necesita fuerza estabilizadora
Jun 6 • 12 tweets • 4 min read
Qué son las reservas bancarias?

Las reservas bancarias pueden ser un tema confuso para cualquiera que no tenga experiencia en banca y finanzas.

Un hilo que explica:
1. Qué son las reservas?
2. Por qué existen?
3. Cuál es su rol en el sistema financiero? Image Reservas = depósitos en cuentas de BC. En EEUU las emite FED. Reservas = tokens dentro de sistema de pago para bancos.

Sistema bancario tiene 2 niveles:
1. Sistema de depósito que usamos en economía real (azul)
2. Sistema de reserva = sistema bancario vía cuentas en FED (rojo) Image
May 6 • 6 tweets • 3 min read
When talking about debt sustainability, it is important to differentiate between government debt vs. private sector (PS) debt.

It is said that high levels of public debt (purple) are a source of fragility yet PS debt, which is much riskier (yellow+green), goes unnoticed.

A 🧵 Image PS over-indebtedness tends to cause crises. Public debt normally limits the impact of such crises.

PS cannot print money to service debt, during crisis it must pick a poison:
1. deleverage/sell assets (⬇️prices)
2. austerity (⬇ spending)
3. default (asset destruction) Image
Apr 17 • 16 tweets • 5 min read
US Government Debt: An Apollo Guideline

1. Deficit & debt
2. Who owns US govt debt?
3. Maturity structure
4. Debt servicing costs

A 🧵 Under current policies, government debt outstanding (or non-government savings) will grow from 100% to 200% of GDP. Image
Mar 25 • 5 tweets • 2 min read
Shadow bank (SB) liquidity must be filled by Central Banks.

SBs supply massive amounts of credit. Role has grown in size/complexity since bank regulation post GFC.

SB system has 2x in size and accounts for 50% of global financial assets.

Shadow banks are too-big-to-ignore.
🧵 Image Core of Shadow banking:
a) short-term deposit-like liabilities held by money funds at one end
b) chain of transactions in repo markets with dealer banks and risk-hungry investors at the other end

a+b = s/t Liabilities are transformed into riskier long-term capital market lending Image
Mar 25 • 5 tweets • 2 min read
La Banca en la Sombra (BS) necesita acceso a facilidades de liquidez de Bancos Centrales.

BS crea enormes cantidades de crédito. Su rol ha ⬆️en complejidad desde la regulación bancaria post 2008.

Sistema BS ha crecido 2x y representa 50% de activos financieros globales.

Un 🧵 Image Núcleo de BS:
a) pasivos similares a depósitos a corto plazo mantenidos por fondos monetarios
b) cadena de transacciones en mercados de repos con inversores hambrientos de riesgo

a+b = pasivos corto plazo se transforman en préstamos de mercado de capitales a largo plazo Image
Feb 21 • 8 tweets • 2 min read
How does a cross currency swap work and why is it similar to a Repo?

A technical step-by-step USD/EUR example.

Party A is based in the United States and wants to convert USD into EUR, while Party B is based in Europe and wants to convert EUR into USD. Image Notional Amounts: Party A agrees to exchange $10 million for Party B's €8 million

Interest Rates:
a) USD Side: Party A pays fixed rate of 3.5% on USD notional
b) EUR Side: Party B pays floating rate based on EURIBOR + 1% on EUR notional
Feb 16 • 12 tweets • 4 min read
Efecto Fujiwara se produce cuando dos huracanes se fusionan en uno solo más fuerte. Estamos viendo 2 fuerzas masivas chocar y reforzarse mutuamente con profundos efectos sociales, políticos y económicos.

Un huracán es la tecnología, el otro es la financiarización.

Un 🧵 Image Velocidad con la que se propaga la tecnología depende de costo del capital.
Cuanto ⬇️es el costo del capital, más rápido se propaga.
Y la financiarización es droga monetaria que reduce el costo del capital a casi 0.

Financiarización = echar queroseno sobre hoguera tecnológica
Feb 16 • 12 tweets • 4 min read
Fujiwara effect is when two hurricanes merge into a single stronger hurricane. We are seeing 2 massive forces collide and reinforce each other with deep social, political and economic effects.

One hurricane is technology, the other is financialization.

A🧵
h/t Viktor Shvets Image The speed with which technology propagates depends on the cost of capital.
The lower the cost of capital, the faster it propagates.
And financialization is a monetary drug that lowers cost of capital to near zero.

Financialization is akin to pouring kerosene on tech bonfire.
Jan 13 • 19 tweets • 5 min read
Mega tutorial de videos/hilos que he creado:

1. Creación de dinero
2. Bancos 101
3. Liquidez
4. Banca Sombra
5. Repos
6. Importancia Déficits
7. Tipos de dinero
8. QE
9. Correlación tasas interés y precio acciones
10. Trampa de deuda
11 y 12. Inflación
13. EEUU no va a quebrar 1. Creación del dinero, quién lo crea y cómo:

Dec 13, 2023 • 7 tweets • 2 min read
Different types of money in different hands
A 🧵on the link between FED, Treasury and commercial bank money.

US government liabilities are different kinds of government money. How this money distributes among entities in the financial system impacts asset prices. Image Let's start w/ bank reserves, which are held by banks and do not circulate in economy. Households & businesses cannot hold reserves or spend them and banks cannot lend out to real economy borrowers.
Rise and fall in reserves should not affect spending, investment or asset prices. Image
Nov 29, 2023 • 6 tweets • 3 min read
#Bitcoin: hacia los $100k a finales de 2024

Un 🧵sobre los eventos más influyentes en precio de BTC durante los próximos 12 meses:

1. Dominio de BTC
2. Rentabilidad mineros
3. Descorrelación con activos de riesgo
4. Flujos institucionales (ETF)
5. Ciclo de reducción a la mitad Image 1. Dominio BTC:
Participación de BTC en capitalización de mercado de activos digitales ha ⬆️de 45% en abril a 50% hoy. La capitalización total del mercado de activos digitales ha aumentado de $1.2Tn en abril a $1,5Tn hoy. Matemáticamente, esto agrega $10k al precio de BTC. Image
Nov 14, 2023 • 9 tweets • 4 min read
The era of monetary easing (QE) still casts a long Central Bank shadow on financial markets.
Yet, few understand how QE really works.

A 🧵that explains:
1. What is QE?
2. Why is it used?
3. How is it implemented?
4. QE does not create inflation
5. Side effects Image QE = monetary policy tool in which CBs purchase predetermined amounts of government bonds and other financial assets to "stimulate" the economy.

QE = unorthodox form of monetary policy that was applied globally after the 2008 crisis (CB balance sheets have soared since then). Image
Nov 13, 2023 • 10 tweets • 4 min read
La era de flexibilización monetaria (QE) ha dejado una sombra enorme de los Bancos Centrales en los mercados financieros.
Pocos entienden cómo funciona QE.

Un🧵que explica:
1. Qué es QE?
2. Por qué se usa?
3. Cómo se implementa?
4. QE no genera inflación
5. Efecto secundario Image QE = herramienta de política monetaria en la que BCs compran cantidades predeterminadas de bonos gobierno y otros activos financieros para "estimular" la economía.

QE = forma de política monetaria no ortodoxa que se aplicó globalmente post crisis 2008 (balances de BCs suben) Image
Oct 2, 2023 • 7 tweets • 3 min read
We all know that global public and private debt levels are high, but have you ever wondered how we reached these levels of debt?

The answer lies in this formula:
GDP = Population size + Productivity

A 🧵on why debt has skyrocketed. Image Population size:
Population growth globally is now only 1% and by 2100, growth will hit zero and the global population will be shrinking. Image
Sep 26, 2023 • 6 tweets • 2 min read
The US Treasury is playing the FED's role and overriding tightening policies.

A 🧵on how Treasury is trying to:
a) cap yields (thru yield curve control)
b) increase liquidity (thru buybacks) Image Yield curve control:
Treasury is relying heavily on bill issuance to fund TGA. Not issuing duration "avoids" an (inevitable) rise in yields.

$0.9 Tn of the $1.1 Tn in Bills has been funded by withdrawals from RRP (roughly 80% of issuance).

x.com/maxjanderson/s…
Sep 7, 2023 • 7 tweets • 3 min read
Banks in the US continue to face an imminent liquidity crisis and these risks have not gone away. Remember, we live in a fragile funding world; not a fragile financial world.

A 🧵on banks' liquidity risk from the perspective of their assets and liabilities. Image Banks ALWAYS carry maturity mismatches as the main source of returns. They acquire short-term liabilities ( ⬇ cost) and invest in long(er)-term assets (⬆️return).

The risk crystalizes when rates⬆️because:
1. Assets book losses
2. Liabilities mature and are rolled at⬆️rates
Sep 5, 2023 • 7 tweets • 3 min read
Los bancos en EEUU continuan enfrentando una posible crisis de liquidez y el peligro no ha desaparecido.

Un 🧵sobre el riesgo de liquidez visto desde la perspectiva de activos y pasivos dentro de los balances de bancos. Image Los bancos SIEMPRE juegan con descalces de plazos para generar retornos. Adquieren pasivos de corto plazo (⬇ costo) e invierten en activos de largo plazo (⬆️retorno).

Mayor riesgo es cuando tasas ⬆️porque:
1. Activos contabilizan pérdidas
2. Pasivos vencen y se renuevan ⬆️tasas