Debt Death Spirals, Fed's Losses, & Fiscal Theory Of Price Level | Peter Stella & Joseph Wang
ฝัง
- เผยแพร่เมื่อ 24 ก.ค. 2024
- Peter Stella, Former Head of the IMF Central Banking Division, joins Joseph Wang, former senior trader for the New York Fed and author at Fedguy.com, and Jack Farley for a wide-ranging discussion on:
-what really causes inflation
-monetarism, fiscal theory of the price level, and modern monetary theory (MMT)
-the unrealized losses on the Fed’s balance sheet
-why yield curve control likely won’t be necessary (or so Peter argues)
-the longer the duration of a governments’ debt, the less inflation is required to inflate it away
-when a central bank incurs unrealized losses, who “wins” and who “loses”?
Filmed on March 29, 2023.
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Follow Joseph Wang on Twitter / fedguy12
Joseph Wang’s writings: fedguy.com/
Joseph’s latest piece, “Ameridollars”: fedguy.com/ameridollars/
Peter Stella on Twitter: / stellar_consult
Peter Stella’s work: www.centralbankarchaeology.com/
“Do Central Banks Need Capital?” by Peter Stella:
www.imf.org/en/Publications/W...
Follow Jack Farley on Twitter / jackfarley96
Follow Forward Guidance on Twitter / forwardguidance
Follow Blockworks on Twitter / blockworks_
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Timestamps:
00:00 Intro
00:15 Peter Stella's Background At The International Monetary Fund (IMF)
03:55 Joseph Wang On The Flaws Of Monetarism
05:52 Milton Friedman: It's The Government That Prints Money
07:56 The Fiscal Theory Of The Price Level
13:38 Modern Monetary Theory (MMT)
24:12 Real Value Of U.S. Debt Is Lower Now Than March 2020
37:33 Permissionless
38:38 The Fed Has Huge Unrealized Losses On Its Balance Sheet
45:29 Details About The Fed's Mortgage-Backed Securities (MBS) Purchases In 2020
51:51 Did The Fed Help Wealthy Homeowners Refinance Their Mortgages In 2020?
54:21 Blockworks Research Plug
55:22 When The Federal Reserve Has Unrealied Losses On Its Balance Sheets, Who Loses and Who Gains?
01:13:50 Joseph Wang's Summary Of This Conversation
01:15:08 Yield Curve Control and Potential Debt Death Spiral
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets. - บันเทิง
Thank God Joseph is here to translate.
“Inflation the debt away”.. Has a very linear academic theory sound to it, in a very non-linear world.. Inflate the debt away: bye bye bond market and reserve currency status..
Apparently that's good for the tax payer 😂. How? by kissing goodbye to your purchasing power/standard of living you get to pay less tax?
Agree you can deflate when you outgrow everyone else. But 2023 Euro and Emerging economy outperformed the US
that fellow is deep. gonna relisten to it again. learned a lot on first pass already. liked how he acknowledged Milton Friedman "inflation is a monetary phenomenon" as an edge case of his own belief that "inflation is a fiscal phenomenon".
Jack Farley is a super moderator. He asks good question in a very articulate way.
4:12 , the fed was measuring domestic money supply when USD was being created offshore, outside the fed jurisdiction. That is why they were unsuccessful implementing monetary policy. It would be great if fed would try to quantify the Eurodollar system to understand money supply and apply policy based on global money creation
Fantastic interview. I didn't know any of the part of what he said about the debt being actually lower but it does make a lot of sense. I always love this channel it's such an opportunity to learn and grow.
Export of inflation mechanism is now broken. That was the American invincibility spell.
What if America could import productivity at a very low cost instead?
That was not Friedman's view. Although I don't agree with some of what Friedman said, I do love all the money-printing apologists that distort what he said. His view wasn't that governments create inflation, per se: his view was that government deficits that were financed by money creation are inflationary. Hence, central banks are necessarily involved as well---the ultimate cause.
"His view wasn't that governments create inflation, per se: his view was that government deficits that were financed by money creation are inflationary."
A distinction without a difference.
The Fed only reacts to irresponsible, in fact the criminal abuse of fiscal and political responsibility by the politicians.
The government,.. not the Fed,... helicoptering checks to consumers (the demand side), a fiscal policy, is inflationary.
The Fed only creates reserves for banks (the supply side) to use to make loans. Banks can't force loans that have to be paid back on anyone,... so the liquidity can get saturated and can get to a point of pushing on a string.
Sending free checks to consumers is like pulling on the string. Who's going to turn down free money and then not spend it?
If Friedman were alive and saw what we've seen the last few years,.. he would agree with eberything said in this video.
Wow Peter is a powerhouse! Also Jack is incredibly sharp moderator. Wow I need to slow down to understand all of this.
This is so interesting, but so hard. I’ll definitely need to listen to this over and over again for a few times.
The guest is full of pro government spin. Not very interesting at all
Hi George, Jack Farley here. I agree with you -very difficult! I was confused on many of the topics during the issue but after reflecting and relistening to the interview during the interview, things made more sense. Learning valuable things is often very difficult!
Fantastic Interview, thanks for doing it !
Wow. Feel lucky to see this type of content.
Only Joseph Wang has a photo of Joseph Wang hanging in the background of his webcast. He is the most interesting man in the world. Stay wealthy my friends.
Too bad we couldn’t hear this explanation on Fed buying MBS in 2021.
Jack killing it again with the timely clarifications!
Phenomenal discussion. Thank you for bringing speakers of this caliber onto your platform. I learned a lot. Thank you all.
The FED had rotted into the FUD. Fear, uncertainty, and mostly doubt.
Wow, going to have to listen to this twice.
This is fantastic
Thank you
Excellent points
Price increases due to supply and demand issues is not inflation. How can raising rates to destroy demand fix the issue if everyone is broke?
It's a sick and stupid mistake to confuse inflation (the increase in money supply) with supply chain issues. Then try to resolve the issue fiscally by raising rates.
@ 25:10
Another way of saying that abuse of the credit/debt markets by the government has really screwed the pooch. First the savers, then the spenders, the creditors, the debtors. Literally, almost everybody!
Where is customer service?
FRED numbers only go to Feb 1st. Has anything noteworthy happened in the last 34 days?
Thanks
I need to listen to this a few times...🤔
Very interesting, but most of us want to know more about what to expect, and what to do about it! We want guidance!
Do you mean something along the lines of 'Forward Guideance'??
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The money printing caused inflation, but this inflation was very much confined to assets such as property and fast cars. The ease with which credit could be obtained reduced cost inflation.
When cost inflation rose, the house of cards collapsed.
The supply chain issues and the Ukraine war caused this change.
In the mean time, excessive and reckless lending had distorted bond markets, stock markets and the property market.
It was clearly a warning when the yield curve inverted last year.
It looks like an unfixable crisis to me.
This is a very important interview. I found it very useful. Thanks.
Inflation in services and general products was insane! Not limited at all to what u claim
So you didn't see the 50% or more inflation in gas, energy, food,....?
The supply chain issues caused by governments worldwide instituting COVID response measures that would have obvious adverse implications on supply chains and creating a proxy war in Ukraine that would also have devastating impacts. It’s almost as though it was done intentionally to provide cover for a system that has been designed to break and is collapsing at a rate they can no longer hide.
Is there a simpler version of this podcast?
Public debt deflated by whatever price index you want is much higher than pre-covid
Trust, but verify
37:35 is there not tons of gov spending that could afford to be cut?
We need rates at 20%. Then all will be extra good. 😂
Its kind of like hotel points or airline miles. These are essential rebates to the issuer (liabilities of hotels and airlines). They can be redeemed for hotel nights or plane tickets. Every year or so, they devalue these currencies - by increasing the amount of points needed to redeem for the same service. This is inflation. They are inflating away their debts (our points/miles). This encourages people use them sooner than later and not accumulate big balances.
Basically, inflationary government spending is a tax. Its also a transfer of wealth from savers to debtors, from everybody to government payees. Purchasing power of money held is being eroded year after year. While debt principals get relatively smaller and smaller in relation to the value of real goods and services.
Its like having shares in a company, and that company keeps diluting your shares by issuing more shares. If they issue these new shares in exchange for nothing, this is inflationary - the value of each share goes down.
When he talks about a domestic debt market, he implies its a good thing that countries that are/were notorious defaulters can issue their own bonds domestically now. How is this good for the country? Or for the people that bought the bonds and are now at serious risk of being defaulted on?
Its just kicking the can further down the road.... "Oh lets issue a 100 bond (deal with that problem later), and bring that purchasing power from 100 years forward to today. "
This is how we are getting into this problem in the first place, by always kicking the can down the road. Eventually you have to pay the piper.
Yes you didn't get inflation today, but screwing your kids tomorrow.
Passionate
Makes sense.
At 52:20 he means everyone in America between ages 60-24 received the same rewards.
Great episode! Glad to hear more people discussing Fiscal Theory. For anyone interested in more details I'd strongly recommend checking out John Cochrane's work on Fiscal Theory - his new book is exceptional and he's done several interviews recently.
Most money is a liability of commercial banks, not the state
Japan is working on the Stella Project. Is Peter the inspiration for Dr. Vegapunk in One Piece?
Did Jack's mic just die halfway through & Joseph just seamlessly stepped in to moderate?
The govt will *never* challenge the Fed on handing money to richer home owners. Never.
No idea 🤷♂️
We need somebody to explain what Mr. Stella is saying. I listened to him for a while but since I couldn't figure out what he was saying I had to stop watching.
Great topic and discussion. Joesph is a macro rockstar,.. as is Alf et al.
Doesn't the FED have the power to hold MBS to maturity, and not realize the losses ??
using a new credit card to pay off the old credit card...
TLDR: dollars have higher velocity than long duration securities (treasury)
“A good thing for the taxpayer” 😂. Give me a break. “Because the FV of deficits is higher… taxpayers are better off.” What if inflation expectations stays even a bit higher than the Fed wants or it takes sustained high interest rates to negate that? What it wages don’t go up with inflation as they have not for 21+ months straight?! Then this model all breaks down.
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Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are a lot of wealth transfer in this downtime if you know where to look
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Loss and win, its story in the fed,
I think the mortgage backed securities make this country poor it goes in vicious cycle never ending.
All OK until OPEC+ doesn't deliver the oil that the US needs.
It is right in saying that inflation is more like a fiscal issue than a monetary issue. Biden Administration should have increased tax to draw money back but he didn't, which was a mistake. The US Fed alone is not a perfect problem resolver of the high inflation.
No,.... the senile ole joe admin should have NOT unnecessarily started a war on fossil fuels, the life blood of the economy, and deficit spent several trillion to buy votes when the economy was already recovering.
Real Market value of US govt debt is lower today, yeah, because bond prices are down and rates are up. Drrr...
I find it very difficult to follow what this guy is really saying.
@ 17:07 Evolution of debt markets, &c.
But are the people of these nations better off for it? Or did unjust enrichment occur, with all of the attendant consequences for the remaining population? Compare:
th-cam.com/video/hRX6hSGeZs4/w-d-xo.html
I had a very hard time understanding this. Too many concepts at one time for me.
So did everyone else. Don't feel bad. This guest has some interesting things to say but he needs to drop the jargon and break it down for the general public.
he speaks theoretically as anyone working for a gov body, they have no clue just find justification to things already happened based on their theories.
Bottom line: We are "turning Japanese" over the next decade. Fed/Treasury dynamic duo will eventually not be able to finance its own internal debt without overt financial repression. That is why he did not want to answer the question at the end. Thank you for the great content.
48:52 FBI!
"fiscal theory of the price level"
First, please establish that there is such a thing as a price level, and how you propose to measure it objectively
👋
good conversation...but in the end. no smart info because they don't want to talk to the public! sad!
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Gov spending
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Dude this was so good serious thank you
$2Q privateers wealth offshore safe and secure. $10T FX/float annually from petro-dollar. Enough cushion. Cheer up.
Terrible sound Stella. Echo and muffled!
What a shill! Pass
So the moral of the story is that the rich get richer, the government continues to be irresponsible. They will collect higher taxes from individuals who are working and asset holders. So invest in crypto or gold with whatever you have left in saving to be part of a club with no substance?
An alternative MOVE. Atat 65, the deterioration of our educational system. Governance, policing. Social irresponsibility makes us the banana republic. On man's view. Thanks for clarifying reality. Stay safe
Why doesn't he want to talk about how they would get out of the "death spiral" at 6+% interest rates? He seems like a calm guy who is disarming, but something tells me that being part of the larger bureaucracy makes you more concerned with its survival as opposed to the common (and common sense) man and the abuse he takes on the central planners behalf. As one ages, please notice that most boomers and older also don't want the world to change dramatically since they'd pay a relatively bigger price given they are the beneficiaries of the ponzi, in large part ... At least Joseph said they would pin the interest rate. But what would be the "clever" ways, Peter? And why won't you tell other people? It seems quite suspicious.
Yea felt that way too. Almost like he was a money manager protecting his trade.
Interesting that you spent over an hour to come to a well established concept ( since biblical times Genesis 47:15) that governments including their convoluted central banks are the cause of inflation. Indeed, the more things change the more they remain the same.
Left this thinking similarly
"Wasn't all this kinda obvious?"
Lol
With all due respect of course, but still
Who does Mr. Wang work for ?.........I'm beginning to worry about the "Kool-Aid" he's drinking. I have listened to at least 10 vids with this guy and still confused who he is protecting and why?
thanks amazing video, I just got more of these few minutes ago. Tying up money due to an apocalyptic stock market crash is also not a smart move. Life is a risk and it's better to take risks than to do nothing, you can't always expect to make huge profits all the time, people have so many opinions about a recession/depression. In just 5 months my portfolio grew by $300,000 in gross profit, the main thing is to expand your portfolio and you will see amazing results by investing.
With everything happening currently, this is some sort of good advice but then it can take a left turn when you go into something blindly, anything worth doing is worth doing diligently. Be sure to go in with the guidance of a qualified FA.
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mind if i ask you to recommend how to reach this particular FA you using their service? Seems you've figured it all out unlike the rest of us.
thank you for this Pointer. It was easy to find him handler Jackson , He seems very proficient and flexible. I booked a call session with him.
Jack you are the macro Vince macmahon 😂