/biz/ - Business & Finance

2/
So what happens? The Federal Reserve, a private organization with the legal privilege of being the only bank able to create USD steps in and buys bonds with the 'dollars' they create from nothing, in order to allow the government to spend more under the premise of 'stimulating the economy'. Now the government doesn't need to price bonds in a way that incentivizes private investment, they can just make bonds cheaper and thus allow themselves to borrow even MORE at lower rates.

MMT advocates say that this isn't a problem, that money printing isn't problematic and that we might as well merge the Federal Reserve and the US Treasury so the government can create as much money as they want (rather than 'borrowing' it from the Fed who creates it out of thin air anyway), but again this relies on the Keynesian notion that government spending is inherently productive, whereas in reality it causes distortions and is often very unproductive.

The problem is that the market sees what the Fed and the government are doing, they see the increases in money supply and subsequent inflation in the price of goods and services, and thus aren't interested in purchasing government debt without a higher return on investment. The Fed can't buy all government bonds without risking destroying the value of the USD, so the government must conform to market expectations and increase the yields of bonds to incentivize private investment. Bond yields can only really go up if the private market is being more productive (which clearly is not currently happening), so the government and Fed work together to lower interest rates for people to borrow money in order to bring forward demand (again, the fantasy of stimulating the economy). This works for a while because of time preferences, but when interest rates reach ~0%, the economy can't be stimulated by bringing demand forward anymore, and then it all goes to shit as the government cannot pay its debt or fund itself.

3/
There's only two ways this situation can go (crash or hyperinflation) and neither are great for the average person. So long as central banks hold gold as their ultimate reserve, gold is the ultimate reserve asset. Buy gold and hard assets to be safe, buy some btc or tech stocks if you wanna try and ride the wave, but keep watching the yields and be careful, history suggests that we're in a very precarious situation, and until central banks around the world sell off all their gold (which they won't), gold remains about the only truly safe asset. In central banks start buying BTC, buy BTC like your life depends on it

tldr it might go up or go down

>>30241800
Fuck you. OP is effortposting and you can't even give effort to read it. I appreciated the writeup OP.

>>30241623
Excellent thread. Its threads like these that make refreshing biz 200 times a day worthwhile.

>>30241883
Sounds like he did read based upon
>There's only two ways this situation can go (crash or hyperinflation) and neither are great for the average person.
Dumbfuck

>>30241735
What will you be doing?

Thanks OP. I usually skip walls of text but I read this in its entirety. Very informative.

>>30241735
>until central banks around the world sell off all their gold

the price of gold be dippin tho

>>30242146
Correct

>>30242163
I'm buying less speculative stocks like commodity producers and medical supply producers. I have some land and am hoping to buy more soon. I have some gold for the reasons I explained, and while I know it is fashionable to hate gold because a few twitter retards have a beef with Peter Schiff, gold is an important part of any portfolio. I'm holding a bit of cash in case there is a crash so I can buy low, but I think it's more likely we see YCC announced by the Fed soon so I'm probably just gonna keeping trading shitcoins in the meantime

Useful. Thanks.

>>30241623
>If yield rates increase, it means that people are expecting a higher return on their initial investment for whatever reason
Wtf are you on about? Yield are up because bonds are down. What is this nonsense?

>>30241623
TLDR OP actually doesn't understand what he's taking about.

1. bonds are not just for yield they are the ultimate store USD of value. Its the global reserve currency. Its pretty fuckin liquid. FDIC (bank account insurance is a meme). storing cash is expensive.
2. OP believes the money comes out of thin air meme but doesn't understand double entry bookeeping, or that the FED is locking up dollars via reserve assets when it buys bonds through primary dealers (its basically just a swap). The M2 may look like its increasing but the reality is money is created through debt, i.e loans.
3. I doubt OP has herd of 'The Grace Commission'
https://en.wikipedia.org/wiki/The_Grace_Commission
4. Lastly, OP fails to realise that the price of gold is called the (((FIX))) & its set by the house of Rothchild daily
https://en.wikipedia.org/wiki/Gold_fixing


OP also check out
https://en.wikipedia.org/wiki/Triffin_dilemma

>>30241623
The problem is that with the economy on life-support, interest must not increase at all cost.
At the same time making the printer go BRRR causes fear of inflation, which causes people to expect higher interest on their money to counter inflation.
They shot themselves in both knees

>>30242661
>Yield are up because bonds are down
bonds are down cause no one wants to buy them, given their current return is lower than inflation. Yields must rise to meet the rate the market demands (right now according to inflation expectations) or else no one buys bonds and the US government becomes insolvent.

>>30242794
OP, your retort?

>>30242661
>Yield are up because bonds are down
It's the other way around, anon.
If you expect the yield to go up, then you'll sell your bonds, so you can buy a new bond that pays higher interest.

>>30242794
>the FED is locking up dollars via reserve assets when it buys bonds
and what are those assets worth if they will just be paid of with more loans?
At this point pretty much every central bank on earth has >50% of its assets in the form of absolute trash that nobody would realisticly buy

>>30242794
Good counterpost , but that fix shit is only for contracts. Coins have premiums per ounce, and price of trading assets like PMs is determined by DXY mostly. Dxy broke out hard today, its most likely over for every risk on asset.

>>30243619
>bond yields go up when people THINK they will go up
So pure nonsense then?

>>30243503
1. Is not a counterpoint. Bonds are government debt first because the assumption is that by lending the US government money, things become more productive and more wealth is created in actual terms, not just nominal terms. That is what gives the USD value first if we weren't living in clown world.
2. Money created through debt does enter the economy up until the point in which it is paid back/destroyed, but the latter isn't happening in the current cratering economy, hence more debt is needed and more inflation is created up until the point where companies are actually more productive and profitable and are able to pay back their debt. Creating dollars to buy unproductive assets is stupid and yet here we are.
3. I agree with the Grace Commission that US government debt is a time-bomb and the only solution will be a default eventually. I don't think anyone really knows what the result of that will be.
4. The spot price of gold is fixed, yes, and obligatory fuck the Rothschilds, but it is central bank holdings that matter to me.

All the Triffin dilemma illustrates is that having a globalised reserve currency is a fucking nightmare without a market determined gold standard, not the stupid manipulated gold standard that FDR imposed.

>>30244287
No, yields are influenced by many factors like inflation, but the price of bonds has little to no influence on the yield

>>30241623
>>30241663
>>30241735

Low IQ goldfag.

I'm not going to be bidding up inert shiny Minerals belonging to some fucking Boomer.

>>30241735
Explain how gold is safe when it dumped 10% today

>>30241623
>Government bonds are an asset where you lend the government money in order to fund government spending. The idea is that government spending is productive and improves the ability of a country to produce wealth, meaning citizens produce more/earn more, and more is returned to the government in taxes which is then used to return the initial investment to bond holders + extra.

but everyone must know thats retarded, people would only do it for self interest and their own greed, plus its doubly ironic cause government cant invest for shit in its own country

>>30244735
Gold has been safe long-term for the last 6000 years.
Short term dumping or pumping is possible though.

Currently it is massively manipulated though, so i wouldn't recommend to get in at this time

>>30244620

>>30244735

So we're all gonna become poor then, yeah?

>>30244936
Yes

>>30241623
Appreciate the great info, OP.

>>30241623
I didn't even read your dumb post. Let me guess how it goes
>10y yields are barely up in the middle of a decades long downtrend
>this means that the world economy is about to collapse
Did I get it right? We have this thread every week and it's always for a different reason.

intriguing

>>30241623
deflationary cycle of doom incoming. after that hyperinflation. prepare anuses. it's really game over this time. we will never recover. this is the great reset. godspeed anons

>>30241663
>Keynesian notion that government spending is inherently productive, whereas in reality it causes distortions and is often very unproductive.

I agree with your write-up, buy the multiplier effect is real and government spending virtually always increases the BIP.

Isn't crypto supposed to be detached from governments and fiat? Why does this matter for crypto?

>>30245195
After hearing people fearpost this so much it's become like the boy who cried wolf for me.

>>30242625
agriculture, food(supply) and water stocks too?

>>30241663
>>30245218
>BIP
Sorry, meant GDP. BIP is German.

>>30243251
The economy is not on life support. Rates are going up, because there will be a masive boom after the covid openings.

>>30241962
this
props to OP

>>30244414
>the current cratering economy
What cratering economy? There will be a post Covid boom, thats why rates are going up.

>>30241883
You're retarded as fuck, anon.

>>30245151
Raising yields becomes more dangerous the more the printer goes brrr because to make printer go brrr you have to issue bonds, debase your currency more and artificially suppress debt market rates, do you understand this?

>>30245225
People panic and sell everything when they don't know what's going on.

>>30245409
Government spending can increase GDP because GDP is just a measure of how much money changes hands, not a measure of productivity. If you increase the money supply through debt or inflation, of course GDP will increase because there is more money in existence, and then politicians will pat themselves on the back and declare they've done a great job without having actually improved anything. This is why John Cowperthwaite, the guy who took Hong Kong from a 3rd world shithole to a global economic center, refused to measure GDP because he thought it was utterly irrelevant to the real world.

>>30245434
>>30245538
weak bait.
The amount of zombies is through the roof. An insane amount of companies are only living off of their substance, which wont last forever.
A massive ammount of individuals and companies rely on government payments to survive.
The only thing that will happen is that inflation will be realised as the flow of money unfreezes again

>>30242249
That's what happens at the beginnings of a recession. 'Stores of value' like precious metals are liquidated by investors because they want to recoup losses on their other investments. Might explain the dip in BTC if institutional investors started seeing it as a store of value as well...

>>30244735
Gold is falling because there will be a massive economic boom after the Covid openings. People need thier money to invest and profit from it.

>>30245944
>beginnings of a recession
Literaölly the absolute opposite. We' will experience one of the biggest booms in modern history after covid.

>>30241663
>but when interest rates reach ~0%, it all goes to shit

interest rates are already below 0% in japan and many parts of europe, and have been for years. Why have things not gone to shit?

>>30245945
>>30246059
>Literaölly

>German Keyboard
>posts garbage bait
checks out

>>30246059
With what money exactly? Most people were living paycheck to paycheck before Covid hit. And a fuck load of people now are unemployed and would be kicked out into the street if it wasn't for the rent moritoriam. Many of these jobs and businesses aren't coming back.

>>30246059
>after covid.
That isn't happening any time soon. It mutates so fast and there are so many variants barely a year after. Also, it spreads so easily between mammals that every continent must have several reservoir species by now.

>>30246468
I used to believe that anon but I think we’re still locked down because they don't want money velocity to go up

>>30245874
You're oversimplifying it, Anon. Government spending doesn't make money magically appear, they invest that money into things like infrastructure, which they need workers for those workers then are able to demand higher wages, which makes them spend more which in turn makes companies produce more, which they need workers for etc.
Government spending is good for productivity. Also Honk Kong rose because they sold the result of cheap chink labor to the west.

Damn I wish I could read

>>30246406
What money? People have hoarded tons of money. Thats what the statistics show. They couldnt spend it for over a year. This will be the biggest boom in modern history.

>>30246635
Government spending takes money away from what people would actually spend their money on if given the choice, and spends that money on things that politicians want instead while wasting a third through bureaucratic inefficiency. Hong Kong was successful because they refused to tax the hell out of literally everything unlike the Keynesian retards in every other country around the world at the time

>>30241623
>If yield rates increase, it means that people are expecting a higher return on their initial investment for whatever reason (typically a strong, growing economy, which then leads to higher market interest rates because companies want more consumer investment to fund expansions in operation, meaning higher profits for the company and a willingness to pay more to borrow savings from individuals).

What the fuck? Bond yields rise when bond prices FALL. So when bond yields are rising(bond prices falling) it means people are SELLING bonds for a variety of factors, maybe rising interest rates(meaning NEW bonds will pay better) or simply the fact that they anticipate that the creditor(bond issuer) Wont be able to meet its obligations. In the case of government issued bonds, they are paid in FIAT currency which of course can inflate and dilute in purchasing power, so right now bonds are being sold off en mass because high finance does not expect the returns of the bonds to beat inflation.

>>30246341
Yeah, we're generally quite smart. This is accumaulated capital in Germany. Should be similar around the western world. This capital, waiting to be invested and spend, will create one of the biggest booms in modern history. Thats why rates are going up.

>>30246635
>Government spending is good for productivity.

You are naive as fuck.

>>30241735
>until central banks around the world sell off all their gold (which they won't)

Tinfoil hat time. What if they did ages ago and have just been lying about it?

>>30247309
If those were reserves of a genuine store of value, perhaps. Instead, they are reserves of a worthless fiat currency of which it's purchasing power is going to be immensely eroded away more than it already has. If you think there is a happy ending for Germany, than you haven't been paying attention.

>>30247309
lmao you have elections this year. your government will sack most of those savings to fuel the socialist death machine.
Also germans are terrible with money and the average german family is less wealthy than an average portuguese or italian family.

That source is also pretty bad, but whatever.
even if the boom happens it will run straight into a meltup with the ammount of printed money

>>30246978
>Government spending takes money away from what people would actually spend their money on if given the choice, and spends that money on things that politicians want instead while wasting a third through bureaucratic inefficiency.
Not going to argue against bureaucratic inefficiency, but government spendings are by extension the choice of the people. That's democracy, sure it's flawed and inefficient, but unless something drastic changes it'll stay like that. And my point still stands, it's better for governments to spend money than to save it.
>>30247314
Literally got a degree in economics, currently working on my Masters.

>>30247309
>Should be similar around the western world

it is, both canada and usa household saving rocketed

>This capital, waiting to be invested and spend, will create one of the biggest booms in modern history.

just because you have a bunch of savings doesnt mean you get a job. explain how the biggest boom will happen when the unemployment is as high as it is? you think every average person will just start a business with their "savings"

>>30241623
Anon in my name and the name of all my retard friends we wanna thank u

>>30247640
>Literally got a degree in economics, currently working on my Masters.
kek.
how does the koolaid taste? You think the government will teach you that what theyre doing is bad?

>>30247642
>>30247617
>>30247640
>>30247642
Im not force feeding you idiots any longer. Have fun waiting for your collapse.

>>30247809
enjoy your boom

>>30247804
>You think the government will teach you that what theyre doing is bad?
I got to a University.
>>30247809
>Im not force feeding you idiots any longer.
Don't you mean "I'm out of economics 101 arguments"?
>>30247859
Based.

>>30244194
>80% of gold trading is conducted solely on paper. People ain't buying bullion that often, as it turns out.

>>30247640
>Literally got a degree in economics, currently working on my Masters.

>He thinks this remotely qualifies him as educated on a subject

Top fucking kek. Talk about niavety. Congratulations anon, you paid to be indoctrinated by government propaganda. What, you think your classes were going to tell you anything other than what the establishment wanted to convey?

>Yeah, turns out we were wrong and we'll just have to give all of our power and economic privileges back.

If you knew the first thing about basic economics you would know that government taxation and spending only diverts free market capital away from where it otherwise be spent most productively.

Go ask Venezuelans how much they are enjoying the fruits of government spending.

>>30248011
>I got to a University.
ah burgerland. nevermind then.
Probably not any less pozzed though

>>30241623
>Might go up might go down
>Buy gold
Nah

>>30241800
fuck off retard

thanks OP. it was a good write up

>>30241623
and until central banks around the world sell off all their gold (which they won't), gold remains about the only truly safe asset.
Anon did u just read what u wrote? Everything was great until u came up with this crazyyy gold nonsense and strong gold shill

>>30248304
Not an argument

too many hard words for me :(

>>30248043
>What, you think your classes were going to tell you anything other than what the establishment wanted to convey?
Pretty schizoid take, but okay.
>you would know that government taxation and spending only diverts free market capital away from where it otherwise be spent most productively
I literally just said "it's flawed and inefficient" and even agreed that a collapse is incoming, you're just oversimplifying things, which makes it seem like you're full of half-knowledge.
>>30248071
Never call me a mutt again, you dumb faggot.

>>30241623
Anons here are some points that u have missed: When yield goes up. It makes it more expensive to refinance which push many struggling biz to bankcruptcy. Also they mean investors are expecting inflation so they want that to be reflected in the real yield they will receive. Yields have an inverse relationship with bond prices.

>>30248386
someone explain in way easier words please

>>30248574
>Too much debt bad
>Inflation bad
>Central bank bad
>All three combined brings death and destruction
>buy gold

>>30245889
Retard take. Nobody thinks this recession was caused by anything but rona. All it will take to get things going again is a little cashola, which is readily available on the supply-side.

>>30248677
thats too easy
somewhat harder words so that i can get a better picture please

>>30248724

>>30245218
Utterly retarded. Government spending by definition cannot be productive and the effect you’re referencing is either greatly exaggerated by falsified studies or is fabricated completely.

>>30248704
why dont you go to the same place the other 10 IQ retard >>30247809
went and post weak bait over there?

>>30248574
The current financial system is just FUCKED UP

>>30248704
Please be bait

>>30248704
>Retard take. Nobody thinks this recession was caused by anything but rona. All it will take to get things going again is a little cashola, which is readily available on the supply-side.

>>30248704
>>30248945

>>30241663
>The Federal Reserve, a private organization
Stopped reading there. I'm sure your perspective is nonsense.

>>30248945
it almost happened in autumn 2019 with the repomarket crack.
It is astounding how many well educated and experienced people predicted a crash for 2019, but the only thing that happened was that weird repo market jump. Guess they have been printing the crash away since 2019

>>30248995
is this the plot to futurama?

>>30249032
>Stopped reading there
lmao you think the fed belongs to the government?

The amount of yield the government pays on bonds doesn't change. The percent yield is relative to the price you pay for the bond itself. Institutions are selling their bonds at a loss because inflation makes cash in hand now more valuable.

Think of the yield as a fixed dividend on a stock. The same dividend is paid out whether you bought the stock for $25 or $100. Right now the price of that "stock" is plummeting.

The financial system couldn’t just be sustained as is. Gov has been printing $$$$$ out of thin air , QE, all these stimulus. All these things have to eventually come to a stop. The way the gov has been getting by is just by printing new money to service old debt and just keep doing all over. The GDP isn’t growing . At some point the show is gonna come to an end which will result in a financial apocalypse. That financial meltdown might come a lot sooner than we anticipate. I think we are right at the corner.

>>30249297
will everyone buy BTC to hedge? I think thats the most logical choice

>>30248995
>>30248945
>>30248837
>>30248927

Seething chimps not understanding the qualitative difference between a market crash caused by the market and a market crash caused by exogenous factors.

>>30249161
>Institutions are selling their bonds at a loss because inflation makes cash in hand now more valuable.

I'm having trouble understanding this part of the concept. If the bonds are being sold at a loss due to concerns about inflation, wouldn't holding cash be a losing proposition as well? Does this mean that the cash is instead being funneled elsewhere? If this is correct, then where? If it isn't, is the case simply being held, creating deflationary pressure?

OP is a literal idiot.
The bond yield is going up because people are literally not buying bonds.
Same as how dividend yield goes up on a falling stock.

>>30249349
Yes, exactly. They are looking to put their cash into inflation-protected investments. (REITs, commodities, etc)

Oil had an unusually bullish day. I'd say a good amount of institutional money is already there.

>>30249433
Thanks for your time. I believe we're at the start of a major commodities cycle.

>>30249329
Crypto and btc are probably the safest bet IMO equities are wayyy overpriced. The paper PM market is sooo manipulated it’s not even funny. And good luck getting ur hands on a large quantity of physical gold or silver. Real estate can only go up sooo much bcs of affordability. At the end of the day people need one house or one apartment to live and if u are charging smthg they can’t afford then ur house is just gonna sit empty. That leaves us with only crypto . I’m not even kidding

>>30249152
it might as well when everyone there is appointed by the government

>>30249349
Basically institutions would rather take a small loss now and move on than hold their position only to suffer a larger loss

>>30249543
Crypto is the most speculative bubble i have ever seen, you can clearly see right now its crashing even when it should be mooning with the news

>>30249637
Oh my god u can’t be serious right now. Crypto crashing? U are a plebit how do I know ? By u saying a 10% decrease is a crash. That’s very normal in the crypto world. Did u see what % gains have crypto made in the last couple of months? It’s still up like 350%

We had this conversation in September and while I don't think a collapse is avoidable at some point, you have to understand that you will be seeing some serious shit geopolitically when we are actually near the brink. Right now this is a shakeout and pmg fags need to get out and make hay while the sun shines ie get attention with gay premature doomposting like OP, before the fed steps in with its BSD that always gets discounted until they act and push it off another year. The deleveraging is healthy and while it does not change the fact that we are heading for a crisis you don't need to listen to a bunch of boomer rock grifters when this will pass by the end of spring yet again.

>>30242625
What commodities stocks are you buying? What medical supply stocks are you buying?

a daily /macro/ thread would be a treat
>>30245434
>>30245538
real economy is dead. the US is a welfare state for its corporations (the only ones who benefit from 0% interest rates) and its citizens. Americans receive 30% of their income as govt gibs.
Truth is the world never really recovered from 2009, people just dropped out of the economy and chose to do heroin and die or NEET instead. Look at this board. It's dire in terms of individual freedom, you won't starve cause of the social safety net, but chances are you aren't living up to expectations.
One day the debt tap will turn off and the western world will go into austerity just like Greece did.

>>30245434
>massive boom
short term boom (1 year?) but the overall trend is to deflation and contraction. Fed's been trying to pump a contracting economy since at least 1997 with Greenspan. Any further back and I don't know because I wasn't old enough to pay attention.

>>30250247
>>30250424

isn't this solely a consequence of boomers and xers locking up (all the) assets for retirement?

>>30246681
back to redit with you

>>30242794
Bonds are not a store of cash if the bonds cannot be paid, they are a claim on cash in the future. No hyper inflation event has ever occurred without the printing of physical cash. But there is only $2TN in cash in the economy with several hundred trillion claims on cash in the form of bonds

>>30250630
There's the consequence of technology, cheap labor and productivity - the automation fantasy everyone here talks about... it won't completely happen but 1 guy can do already do the job of 2 did in the past. Like wagies are moving 120 units at the warehouse instead of 100 in the past. 40 workers at the farm can feed 50000 people.
That leaves many out of a job, but they won't go hungry they can get gibs or make youtube videos and eat.
Also wealth concentration - the ones who own the farms and capital. More money goes to the top; it's hoarded and just doesn't go around and stimulate the economy by people spending.

And look at it from a micro-perspective and how your peers act. Do they spend or are they thrifty? Do they even want to spend. Economic growth is predicated on spending on goods and services and I don't think people just spend as much as boomers did in their prime; whether that is out of necessity or preference I don't know.

>>30242794
The fed’s balance sheet is taking in garbage collateral to create new money in a desperate attempt to stave off deflation and a collapse of hundreds of trillions of bad paper

>>30250913
Depending on the sector, one guy can do the job of close to 100. The difference is, that productivity increase was set against - and occasionally eclipsed by - a sustained population boom. That is no longer true, so the impact of productivity is being seen in full now.

>>30251039
Also, speaking on the micro scale it's not out of preference. Millennials are gagging (the women literally so) to sell out to someone, anyone.

>>30250630
also the average american below the top 10% of wealth was too stupid to increase his networth in a 10 year long bull run...
some changes in the distribution of wealth, financial education and opportunities must change in the real economy. A big washout and deleveraging would be a massive first step instead of trying to pump something that's dead.
Then even if it sounds silly, like trade jobs with your neighbors and friends. Sell your friend a burger for $5 instead of going to Mcdonald's, let him shovel your sidewalk for $5, get some sort of money moving around at the community levle. Grow some basil and sell it for $5. it's a major drop in efficiency and productivity but what is the alternative?

>>30251285
> but what is the alternative?
Only fans, show me you private parts goy.

>>30247559
top kek
these faggots are going to get weimared again

>>30249867
BUT MOM POLITICS ANB POLITICS ABROAD CANT JUST GET INSIDE MY ECONOMY AND MAKE IT DO THINGS!!!!
GET OUT!!!
>>>/pol/

>>30249867
This is probably true and the most realistic take. Just like the fear posting last year

Just stop giving out stimmy checks
Problem solved.