Potential Asset Rotations: Deep Dive Analysis
To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys.
Jonathan Tepper • Endgame: The End of the Debt SuperCycle and How It Changes Everything
Inflows should exceed outflows: Over the long-run, the returns of the treasury (inflows) should be greater than the spending rate (expenses/value of treasury) + inflation rate.
Shreyas Hariharan • How to Structure a Protocol's Treasury
What should we do about this fact? Does this throw off market signals about what the bond market is telling us, since the “bond market” in reference to actual private bond investors is less than half of the recent Treasury demand, while a semi-government institution is more than half of Treasury demand, against a backdrop of record Treasury supply
... See moreLyn Alden • May 2024 Newsletter: The Bond Market Is the “Dumb Money” Now
In the real world, of course, financial assets grow over time as well. Figure 5, above, shows what the distribution of total assets would be like after one year in the hypothetical case where each category of financial asset has grown in proportion to the increase in net worth.
The stock of equities increases, for example, because owners of firms is
... See moreDr. John Rutledge • How to Think About the Deficit, the National Debt, and Interest Rates
As noted, financial markets today serve as giant debt refinancing mechanisms and not as the new capital raising vehicles popular in finance textbooks. Here balance sheet capacity, i.e. liquidity, is what matters, not interest rates. In a World dominated by new investment spending, interest rates serve as the cost of capital, but in a debt re-financ... See more
Michael Howell • The Debt-Liquidity Spiral
Item #1: Fiscal Deficits
U.S. fiscal deficits were huge in 2020 and 2021, but contracted in 2022 as most of the emergency programs dwindled.
However, by 2023, fiscal deficits began rising again , mainly due to increased interest expense. This is where fiscal dominance became rather sustained: the Fed’s interest rate hikes, which were meant to slow
... See more