DDB Followup, Plus More Luongo Big Picture

Let’s start with some tweets that lay out the terms of the ongoing debates.

Danielle DiMartino Booth @DiMartinoBooth

Outstanding & timely take on slow motion deflationary train wreck that’s been set in motion. (Don’t worry about your precious metals. They LOVE a bona fide financial crisis.)

ʎllǝuuop ʇuǝɹq @donnelly_brent

Macro update... There are two schools of thought... A. Regional bank fear is contained with no new SVB popping up and FRC is the last domino. Similar to UK gilt crisis, the authorities changed the rules and now we slowly go back to normal. B. Lending is impaired going forward… https://t.co/31tYndt18h

Macro update... There are two schools of thought...

A. Regional bank fear is contained with no new SVB popping up and FRC is the last domino. Similar to UK gilt crisis, the authorities changed the rules and now we slowly go back to normal.

B. Lending is impaired going forward as deposits flee and fear takes over at US banks. Even the large banks will be pushing lending standards to 11 out of 10 now as there are so many cracks in the edifice and YC inversion is squeeeeezing...

I'm more in Camp B but think it's a slow motion story that will need some horrendous US data to confirm.

I still think the Fed hikes 25 at the March meeting as a final bonetoss to the inflation mandate. Cuts in mid-summer don't seem outrageous but obviously depend on sentiment and growth data. Inflation data is less important now as the Fed can easily look through spot inflation and point out deflating commodity prices, tight bank lending, and big base effects.

Like 2019, we might be surprised at how fast yields go down. 10-year yield went from 3.25% to 1.45% in less than 12 months in 2019 (before COVID).

Danielle DiMartino Booth @DiMartinoBooth

#BTFP only $11.9B of total. But it appears clarity has arrived, Praise God. (And yes, I am not being facetious wrt referencing God. I’m a religious soul.) Delighted that after a LONG 24 hours @saxena_puru is among those who appreciate that what’s just transpired is deflationary.

Puru Saxena @saxena_puru

The $300b spike in the Fed's balance-sheet is not QE but an increase in "Loans" via the Bank Term Funding Program and credit extensions to banks. The Fed is providing liquidity to the banks as the lender of last resort.

The $300b spike in the Fed's balance-sheet is not QE but an increase in "Loans" via the Bank Term Funding Program and credit extensions to banks.

The Fed is providing liquidity to the banks as the lender of last resort.

🦚Phil (#PowellisMyPal) Gibson🍊 @MrPseu

💯 It’s NOT QE bc the banks take a collateralized loan/are expected to pay back principle + interest over a year. ALSO, the money supply didn’t increase. Plus it’s not a bailout bc that’s what the FDIC is for & the major banks flip the bill for the uninsured deposits.

Tom Luongo (Head Sneetch) @TFL1728

So, no buyers for SVB b/c the Fed and Wall St. didn't bail it out. They file Chapter 11. And on the same day $FRC, after a major capital injection by those same guys on Wall St. sees multiple buyers emerge. Message sent, message received. https://t.co/acRZb8flnC

Tom Luongo (Head Sneetch) @TFL1728

At least in the short term. Long term, the economy needs rebuilding... This is the Misesean Choice.

The Good Householder @divine_dividend

@TFL1728 Inspired by you https://t.co/ODxjm5J6Qq

This plays into all of the above as well:

Will Schryver @imetatronink

@DerAchsenZeit The fools in the west attempted to excommunicate from their midst the largest, most bountifully endowed commodity producer in the global economy. In so doing they have condemned both their economies and their currencies to ruin. Time is on Russia's side, and always has been.

That gave the rest of world—and especially the Eurasian bloc, including now KSA and Iran—the incentive to seriously start implementing a commodity based monetary system, while the collective West is left scrambling, trying to save the way things were. This war forced change overnight, with Europe totally unprepared and the Zhou regime caught between Davos and the Fed—and Eurasia. The offshore dollar shadow banks that have ruled the world since the 1960s are unable to deal with that combination of Eurasia and the Fed.

Now, I want to recommend highly this hour and a half podcast with Luongo that I’m currently listening to:

THE WAR FOR THE DOLLAR IS ALREADY OVER

Here’s the TOC, to give you an idea of the issues that are discussed—and the first hour is the key, although the later part continues excellent discussion on the budget, rates, and the importance of shrinking the Fed’s balance sheet and the dollar flow (QT):

Time Stamp References:
0:00 – Introduction
0:50 – Banking Crisis & FED
6:36 – Targeting Inflation
14:46 – Eurodollar & Crypto
17:26 – Bail-Outs & Capitalism
22:10 – Spreads & Domestic Mkt.
29:25 – Rate Risks & Europe
34:20 – Japan & BOJ & Europe
45:10 – LIBOR vs. SOFR
52:33 – Yellen Vs. Powell
58:10 – New Monetary System?
1:02:00 – Dollar & Global Trade
1:10:46 – Remonetizing Gold?
1:18:28 – Picking Rates?
1:20:00 – The Bigger Picture
1:23:42 – Learning & Growth
1:31:14 – The Anti-Info Age

And here’s an excerpt from the overview:

Luongo believes Powell wants to undo the damages of the last 15 years and feels it is important to understand the motives of the Fed and globalists.

He also suggests that the Fed took out Silicon Valley Bank due to its involvement in crypto, which could have created an escape velocity for trust in those systems, and challenged the Federal Reserve’s control of monetary policy and fiscal policy.

Powell’s move to guarantee the hole in the regional banks’ balance sheets has had a positive impact on the local credit unions, which can now start offering positive savings rates again. Additionally, the Fed has created a sump pump for US Treasury demand here in the US banking system, which transfers risk overseas and helps protect credit spreads. Christine Lagarde has been attempting to manage credit spreads, but is running out of bullets.

Mr. Luongo discusses the recent shift in monetary policy by the Bank of Japan, which saw the appointment of Ueda as the new head of the bank. Tom suggests that this signals the end of Quantitative Easing in Japan, and that this could lead to the unwinding of the low-yield carry trades that had been supported by the BOJ’s yield curve control. He then explains how this could impact Christine Lagarde’s efforts to maintain credit spread stability, as the BOJ’s yield curve control had been supporting her efforts. Finally, he speculates that this could lead to a weakening of the Euro, potentially leading to its breaking the parity with the Dollar and going as low as 60 or 70 cents.