[ExI] Odd Market Moves

[Dylan Distasio]

Hi Brent-

A few comments from the peanut gallery, as I'd like to better understand
your argument.

I'm not sure how you're defining inflating here. Inflation is generally
used in the context of money devaluing, so I'm not sure I understand this
sentence correctly.  Are you referring to the USD strengthening
against other currencies?  I'm also not sure how you are defining a money
supply not keeping up with an accelerating economy (how are you measuring
money supply, and an accelerating economy).

On Fri, Mar 13, 2020 at 12:59 PM Brent Allsop via extropy-chat <
extropy-chat at lists.extropy.org> wrote:

> Yet despite all that money being printed, money is still inflating in
> value (lack of desired inflation of the cost of goods), because the money
> supply is failing to keep up with the exponentially accelerating economy.
>

Negative interest rates are strictly a creation of central banks that have
allowed them, and banks are forced to hold the paper under regulations.
 The only way they'll happen in the US is if the Fed decides they want to
let them happen.  When you say, they can't get the price of bonds to go up,
I assume you're referring to yields (interest rates).  I'm not trying to be
pedantic, just making sure, as the price of bonds has a specific meaning
related to where the actual bond is trading at in the market, and bond
prices have generally been going up a lot because interest rates continue
to fall.

I don't know if anyone can say for sure why there is no inflation in
interest rates themselves, but if the demand for bonds exceeds the supply,
bond prices rise and interest rates/yields fall.  This tells me that
despite the heavy borrowing of governments like the US which is running a
large deficit, there are still few places people feel safe parking their
money as they keep funding the US (and others) despite a lousy deal on the
interest.   If other governments and miscellaneous parties stop buying as
heavily, interest rates will rise, but that hasn't happened yet.

If there was an actual liquidity crisis (I assume this is what you mean by
not enough money, but correct me if I'm not understanding), interest rates
would go up quickly.  That's what happens whenever borrowing gets hard
(implying a lack of liquidity).  Financial markets sieze and rates go
through the roof to compensate anyone willing to provide funding.   With
everything in freefall, that's why the Fed just pumped a trillion (yes, not
a typo) dollars of short term liquidity into the overnight repo markets
(and also announced they would start buying a lot of other assets on their
book).



> The USD isn't quite there yet, but most currencies now have negative
> interest rates to hold money in a bank account, for the first time in
> history. But even
>  this can't get the price of bonds to go up, because there just isn't
> enough money to keep up with the exponentially accelerating economy.
>
>
> On Thu, Mar 12, 2020, 10:24 AM John Clark via extropy-chat <
> extropy-chat at lists.extropy.org> wrote:
>
>> Usually when stocks go down bonds go up, especially high quality low risk
>> bonds, but not this time, this time everything is down, even the price of
>> gold is down. I'm not sure what that means but it's definitely weird and a
>> bit concerning.
>>
>> John K Clark
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