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Discussion in 'The Kruse Longevity Center' started by Jack Kruse, Mar 11, 2021.

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  1. Jack Kruse

    Jack Kruse Administrator

    Higher prices are being met with less demand = stagflation becomes deflation
    7 million people lost unemployment benefits in the last two weeks. Powell is expecting most of them to have jobs by the Nov FOMC meeting so they can taper.........
    That will do Powell in.
    It will open the door to Brainard
    and UBI

    Sean Waters and ND Hauf like this.
  2. Jack Kruse

    Jack Kruse Administrator

  3. Jack Kruse

    Jack Kruse Administrator

  4. Jack Kruse

    Jack Kruse Administrator

    Since 1800, 51 out of 52 countries with gross government debt greater than 130% have defaulted, either through restructuring, devaluation, high inflation, or outright default. US default is close.

    Since 2008, the Fed has been buying assets by issuing short-term debt. (Interest-bearing deposits held at the Fed are equivalent to short-term debt issued by the Fed.) In effect, the Fed has been executing a highly-leveraged carry trade by borrowing to purchase higher-yielding government, agency, and corporate bonds.
    Contrary to popular belief, the Fed cannot pay off the USG’s debt by printing money. Printing money would cause hyperinflation (e.g. 1920s Germany and Venezuela today). Hence the Fed has funded its bond purchases by borrowing rather than printing.

    The catch is that the Fed will be trapped if Treasury yields spike due to a USG debt crisis. If the Fed does not raise the interest rate on its deposits to match spiking Treasury yields, hyperinflation would result as banks redeem their Fed deposits and lend them to the economy. If the Fed does raise the interest rate on its deposits, its carry trade would hemorrhage cash and exacerbate the debt crisis.

    If central banks (CBs) could always keep interest rates low, no government would ever default. Yet, in 2020 alone, Argentina, Ecuador, and Lebanon have defaulted despite their CBs’ best efforts. Rich-country CBs have also been overwhelmed often (e.g. the 1965-82 US Great Inflation, the 1976 UK IMF bailout, Iceland’s 2008-11 crisis, and the 2015 Swiss currency peg collapse).

    Worse yet, government debt is also currently at dangerous levels in other major economies, including Brazil, China, Japan, the UK, and the eurozone. Further, the BOJ and ECB, among other major central banks, are executing reckless carry trades similar to the Feds. Thus, a government debt crisis in one country might easily ignite a global government debt crisis that pops the bubbles in China, US equities, and US real estate.

  5. Jack Kruse

    Jack Kruse Administrator

    Soon after mandates will come the great bank confiscation. Few see it coming. E.O. 6102 = 2022 negative interest rates, knowns as financial repression, will be the way the banks will transfer the coming $$$ default to the depositor. Convert fiat to BTC soon.
  6. Jack Kruse

    Jack Kruse Administrator

    At that time negative interest rates were isolated to a couple of trillion dollars. Obviously, it was a lot at the time, but those were mainly in European banks. Today, we have exceeded 20 trillion in negative rates, creating the apathetic captive audience governments need to get to the other side of this debt cycle. Negative interest rates will keep growing to solve the debt crisis. On top of that, the International Monetary Fund published an 83-page white paper in 2019 directed to the banks outlining the bailing in idea. This is called something different from a bailout. The government bail-out of 2008 was different. This is the bailing in, using depositors’ money, of a defaulting system to bailing out banks this time.

    The paper states on its first page all that a depositor really needs to hear to realize there has been a significant shift in the attitude of the system as to who really owns a deposit. Is it the depositor, or is it the property of the system? The paper states that the zero interest rate bound is not a concern, it’s not a law of nature it says, and that it is reasonable for the sake of the system as a whole, to confiscate a portion of the depositors’ money for the sake of the whole. Now, I would think that the zero interest rate bound is a law of nature – thou shalt not steal.

    Now you can see where the idea of the wealth tax is really coming from.

    Creating a captive audience is done in how incentives are used in a propaganda campaign to end the banks debt problem. This creates inflation to drive asset bubbles while real interest rates go negative..........This defaults the depositor and not the bank while the depositor thinks they are more wealthy from higher stock and home prices. They are not.

    The reason governments want to discourage BTC: It impedes building the captive audience = allegory of the cave
    Sean Waters likes this.
  7. Jack Kruse

    Jack Kruse Administrator

    The real goal of bank repression: anything that changes the original bond contract to terms that are less favorable to the creditor is a credit event. Of course, there are haircuts, so if they borrowed one dollar but will only repay 80 cents, of course, that is a partial default.

    But there are defaults, and there are defaults, meaning, in orders of magnitude. I’m taking this time to clarify the concept of default because very often it is thought of as just a general suspension of payments, very dramatic, a la Argentina in 2001. Our default won't be like this one. It will be a slower 2004 Mexican peso default.

    In the US, much of our debt is privately held. It is domestic in nature, and not external debt, suggesting that the approach to default is a little bit different than it was in the 1930s in Europe. With external debt, you see those classic haircuts, restructurings, an extension of maturities, reduction of interest rates, etc. But with domestic debt, you have to have chronic inflation, which has been a classic measure of dealing with domestic debt. Today, in the US we have that. What will come next is the wave of negative interest rates at the same time chronic inflation is present.

    Financial repression often has two pillars. One is consistent or sustained negative real returns on savings. Of course, that includes negative returns on holding government debt.

    Chronic inflation is an opaque tax. It requires no legislation to enact it. Monetary policy usually creates an inflation narrative along with the political instability of global supply chains. COVID offers this protection to creating this tax for the government benefit when it is in debt.

    And the other component of financial repression is much more heavy-handed financial regulation to get institutions and individuals to hold more debt. And the first element, which is sustained negative returns, is basically a tax. It is a tax on the bondholder. If you exposed that you have a negative 2% or 3% return on a bond, you are paying to hold that bond. You are being taxed. So financial repression is nothing other than another opaque tax like inflation mentioned above. And I say opaque because it is not legislated. Most taxes that we pay in the U.S. and elsewhere go through a legislative process. This is a tax that is largely the outcome of having yearly monetary policy being responsible for delivering negative returns … real returns.

    So when you marry monetary inflation and negative interest rates you are double dipping stealing from the taxpayer and bondholders of your domestic debt to solve your debt cycle problem.

    To pull this off you need regulatory help. So you get institutions to hold more government debt. Now, that has happened not just in the U.S. but it has been fairly widespread across the advanced economies since the financial crisis.
    Sean Waters and ND Hauf like this.
  8. Jack Kruse

    Jack Kruse Administrator

    Financial repression is not new. At the end of World War II this time, we have now moved from the explicit defaults of the aftermath of World War I to the more subtle forms of debt reduction, the financial repression tax at the end of World War II. When I say at the end of World War II, I really mean decades after World War II also, we, meaning the United States and most of the advanced economies, had highly regulated financial markets and interest rates were low. They were not consistently negative in the way that we are seeing in Japan and in Europe, but they were consistently low, close to zero, the way we have seen here in the U.S today.
    Sean Waters, caroline and ND Hauf like this.
  9. Jack Kruse

    Jack Kruse Administrator

    From 1945-51 inflation was present but not hyperbolic by system design.
    Inflation was not the 1970s galloping inflation, but nonetheless, there was a steady dose of inflation averaging around 4% or so. But that combination of very low nominal interest rates and a steady dose of positive inflation meant that real returns in the economy were negative about half of the time, and that helped reduce or liquidate government debt created from WW2.
    Sean Waters and caroline like this.
  10. Jack Kruse

    Jack Kruse Administrator

    Note that CHINA 5yr Credit Default Swaps is trending towards BBB territory in the eyes of the market. The world's second largest economy is a borderline "non-investment grade credit risk. Evergrade effect.
  11. Jack Kruse

    Jack Kruse Administrator

    China bond market went boom today.......
  12. Jack Kruse

    Jack Kruse Administrator

    Energy market will cause Fed to make the critical error in my opinion. It will follow Biden's huge mistake in the energy spaces this year.
    Moscow’s EU envoy urges Europe to fix ties to avoid gas shortages.

    The Biden administration literally removed NordStream sanctions on the condition Germany would challenge Russia if they attempted to use energy as a weapon against them. These guys in Washington DC are so consistently wrong on motivations and strategies it boggles the mind how they can be elected.
  13. Jack Kruse

    Jack Kruse Administrator

    Perhaps no broadcast has so decimated the Fed and Yellen in less than 15 minutes...WATCH:
    The $ Rx: Decentralized money = Bitcoin knows something the rest of the market does not, right now.
    Richard Watson and DebraGM like this.
  14. Jack Kruse

    Jack Kruse Administrator

    Inflation + negative interest rates = how Yellen and Powell plan on dealing with the debt = how financial repression will be carried out. Risk transferred to taxpayers/depositors
    Sean Waters and JanSz like this.
  15. Jack Kruse

    Jack Kruse Administrator

    Inflation is running 5.4% The unemployment rate sans "quitters" is 1.9% QE is still running full throttle and Fed will not touch Fed Funds for at least a year. Let that sink in.

    They are only tapering because of what is happening in the repo market. And they do not plan on raising rates for fear of popping the debt bubble they blew. My guess is that they are hoping inflation will reduce debt levels. However, this will only widen the wealth gap. Strap in folks.
    Sean Waters and John Schumacher like this.
  16. Jack Kruse

    Jack Kruse Administrator

    The not-so-friendly skies
    Alex Berenson
    1 hr ago 298

    Get ready for turbulence ahead.

    Yesterday American Airlines had almost 300 of its flights canceled, almost 10 percent of its total schedule, far more than ANY other carrier in the United States (Southwest remains second), and another 673 delayed. It is no doubt purely coincidental that I have heard from multiple pilots at American this week and that its pilot forums are filled with anger at the vaccine mandate.

    It is also no doubt a coincidence that Delta - which has had far fewer problems than the other big carriers - has been the only one NOT to impose a vaccine mandate.

    Meanwhile, though they still insist last weekend’s meltdown had nothing - NOTHING, I TELL YOU - to do with their vaccine mandate, Southwest’s executives have dramatically changed their rhetoric about said mandate.

    On a video call yesterday, the company’s CEO encouraged employees who don’t want to be vaccinated to apply for exemptions and said he didn’t want anyone to lose a job over vaccinations. Last week, the language went like this: “Failure to comply with the COVID-19 Vaccination Policy will result in termination of employment.” (Still, the mandate remains in place, unless Southwest simply decides to wave through every exemption request.)

    Nothing to see here, folks.

    Let’s be real: many airline employees are furious with the mandates. Especially pilots. By nature they tend to be conservative self-starters. No one decides to fly planes for a living if he isn’t comfortable with pressure and being responsible for other people (and has an ego, too - old joke: How do you know there’s an F-16 pilot in the room? He’ll tell you.)

    They - many of them, anyway - don’t want the vaccine. But unlike most people, they can do something about it. They are inside huge companies with VERY complicated work rules, and they have union protections. And they are aware of the fragility of the system, and not just at Southwest.
  17. Jack Kruse

    Jack Kruse Administrator

    As expected, Chile hikes interest rates 25 basis points to 3.5%, trying to counter inflation that is running rampant. The Fed is blind to the global wave of inflation from monetary policy.
    Peru and Colombia's central banks have raised interest rates.

    Chile now faces dilemma of imbalances and peso appreciation = BTC solves it
    caroline and Sean Waters like this.
  18. Jack Kruse

    Jack Kruse Administrator

    The dual mandate is a suicide pact. The two goals of price stability & maximum employment are known collectively as the "dual mandate. The Federal Reserve's (FOMC), which sets U.S. monetary policy, has translated these broad concepts into specific longer-run goals and strategies.
    CPI/PCE has become so convoluted they can read hot for years, no matter what the Fed is doing. They are warning lights that no longer have fidelity to the economy

    While longer-term U.S. yield curves generally flatten, gaps in shorter-term rates are steepening. The gap between 3-year and 2-year Treasury yields is about the widest since 2017 as traders price in Fed rate hikes.
    It be wider still, as the magnitude of tightening the Fed now ignores is confronted next year. Look at Taylor, it's the Fed's own rule. Says rates should be 6%.

    The new Fed rule is Kashkari's rule which states that rates always stay at zero no matter what the circumstances are.

    U.S. government says it expects households to see their heating bills jump as much as 54% compared to last winter (supply chains). This with inflation is going to cause DYX strength = Clubhouse thesis wrecking ball.
    caroline likes this.
  19. Jack Kruse

    Jack Kruse Administrator

    Turkey Lira hits record low as Erdoğan sacks, central bankers. Erdogan removed two deputy governors. One of them, Ugur Namik Kucuk, was the only member of the bank’s 7-member MonPol committee to oppose a rate cut that shocked international investors last month, according to FT.
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  20. Jack Kruse

    Jack Kruse Administrator

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