@Weston Nakamura and @Jack Farley will be doing RVDB Live Today and taking questions from The Exchange. Ask your questions for Weston and Jack in the comments under this post for them to answer live!
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In The Exchange you can ask and answer questions and share your experience with others!
@Weston Nakamura how do you manage to do interviews at that time must be late in Japan?
Great chat Weston and Jack !
Interesting about the puts. Never expected that (for 50centers!).
I'm glad you mentioned Brad and the Exchanging Lanes idea. I have thought about that from his various valuable comments! Cool,
This was incredibly valuable. Thank you both.
I was wondering what happened with that late night Lira BTC call as I too spent the day looking over my shoulder to see the low buy in opportunity that never materialized rofl
Following on from the question from @I N, is it true that the Fed balance sheet is effectively the inverse of the value of the dollar, i.e.:
BS * (price of dollar) = constant (measured in gold, maybe?)
Most of Raoul's recent charts use (1/BS) as the unit of account, not a currency. Why is that?
How is it that the Fed creating money to buy mortgages, bonds, equities, etc., creates inflation? Obviously it inflates those asset prices, but how does endless QE/YCC affect the prices of daily necessities?
>> @Jack Farley and @Weston Nakamura are superstars.
@Keiichi M thanks! Good question/questionING.
So- #1 why the monetary base or central bank balance sheet denominator, rather than its respective currency. This in part goes to my response below. So let’s say Raoul is doing SPX/fed, and you’re saying why not SPX/currency level or price. well, as you will see in the short video I posted below, currencies (be it USD, EUR, AUD, CAD, whatever) are not standalone instruments, they are pair trades. You can’t just buy “the yen,” you have to sell ___ / buy yen. So if that’s the case, what would you put in the denominator for SPX/currency? If you just do SPX / $, then that’s simply the prevailing price of SPX, which is denominated in dollars. so what USD pair would one even use? SPX/EURUSD? SPX/JPYUSD? All that does is show you returns on SPX as a foreign unhedged buyer. So that won’t tell you how much of the on-paper SPX gains are due to money printing and how much are legit growth.
And for your second question - the price level of s currency pair does not reflect in any way how much supply of that currency is being created out of thin air snd flooding the financisl system. So tske BOJ & Fed for theoretical example. Pre YCC days, BOJ was buying ¥80 trillion in JGBs/year, which comes out to very roughly $60bn / month with USDJPY at 100 parity (1 cent = 1 yen). And let’s say BOJ was doing that buying of $60bn of JGBs/month. Then let’s also say the Fed is also also $60bn in treasuries / month ( 1/2 of the 120 bn).
Then all else equal, if BOJ printing $60bn/month of new yen supply, and the Fed js also doing $60 bn / month in new dollar supply, and bond yields on USTs and JGBs remained static, then USDJPY might stay pinned down at 100- because they’re both printing and matching each other with every extra unit of $ or ¥, and relative supply ratio of JPY & USD remains unchanged. But if you only look at / use “USDJPY at 100 (or whatever level) and thsfs all you looked at, you wouldn’t be aware of the fact that both these centrsl banks are each flooding money supply. That’s why you do it with a measurement (like balance sheet) - to compare the QUANTITY of money created vs cost.
And finally, how does printing of money go buy financisl assets and flood the system with liquidity cause inflation- real inflation in the real economy? my response is- rather than (or in addition to) asking “how,” I think we need to ask “DOES it cause inflation in real goods and services in first place. Japan invented / implemented QE around thurn of the millennium. and Kuroda took it to steroids levels in 2013. Where’s the inflation?
I hope this question makes it in. I would like to get some comments on how the proposed budgets coming from the US president and the counter proposals from his opposition (all pointing to increased fiscal spending) will affect the value of the dollar that is circulating on the street. We all know that this is implied currency debasement if it comes in the form that we al expect it will. But will it just inflate equities, or will it inflate the prices on the street, and what is the timeframe.@Jack Farley and @Weston Nakamura are superstars. Thanks for all your efforts!
@I N (very tough to type/populate your name to tag- maybe add line more letter after the “i” )
Thanks for the question and support! So i just want to first clarify what you mean by “prices on the street” - is that referring to link real goods and services (apples at the grocery store etc)? Or “the street” as in Wall St, as in financial instruments (ex equities)?
But broadly speaking- the Dem vs Rep bid x ask on stimulus size - everyone knows this is exactly whats part of the process, so the coming to (or not) agreement part isn’t likely to be material. If youre referring to the fact that were now at a point of ”debt doesn’t matter” (everywhere, not just US) to the point where even the ”fiscal conservative“ GOP offer is a trillion,- what will the consequences be on the be ion the value of the dollar (if i understand correctly?)
the answer is that you can’t look at the dollar / US fiscal or monetary policy in a vacuum. Because the dollar isn’t a standalone instrument. It’s the dollar vs ____. Right now, DM / G5 currencies are going big on fiscal after going colossal on monetary - but theyre doing it in tandem. If the US were spending trillions every other month and put up a budget with a 6 handle trillion, and like EU and Japan were (somehow mythically) running surpluses or something, then yea the dollar vs EUR and JPY would be crushed. Like USDJPY 10, EURUSD 1000.
But the more general question (or answer) to seek from this comparative stance is policy aim and agenda. So take the US and EU for covid response (and DXY is basically EUR + other sprinklings). Both US and EU decided to go fiscal, finally for once, but different aims and agendas. The US decided to save incomes, the EU decided to save jobs. Who was right, how that plays out, and the infinite ripple effects - that’s all yet to be seen. That’s how to think about it in a broad scale though.
See this short but important video from a post i made a while ago: The so-called “Dollar” Explained
Spot on. I do remember that video.
Exchange Week Ahead w/ Weston and Petr
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