While sifting through some material on the yield curves, I came across a framework that I found more useful than the usual “is it inverted?” discussion. That question comes up a lot. But on its own, it doesn’t really help with positioning. A far more practical way to utilize the curve is to ask the…
Author: Shawn Dexter
The Bank War: America’s First Fight Over Central Banking
Debates over the Federal Reserve may feel modern, but America’s first great battle over central banking happened nearly two centuries ago. President Andrew Jackson faced off against Nicholas Biddle, head of the Second Bank of the United States, in what became known as the “Bank War.” It was a fight over money, power, and democracy…
Federal Reserve: Debt Monetization and the Paradox of Paying Interest on Reserves
I was brainstorming with a friend the other day, and she was puzzled by something that I think many people find counterintuitive: how the Federal Reserve creates reserves seemingly “out of thin air” when it buys Treasuries, and then pays interest on those reserves. It’s one of those quirks of the financial system that sounds…
Sleep Deprivation, Hunger & Insulin Resistance
For some time now, I’ve observed a curious trend: on nights when sleep eludes me, my hunger seems to ramp up. As someone committed to maintaining a relatively lean physique, I’ve often pondered the underlying mechanism for this correlation. Today, I stumbled upon a study highlighting a robust link between sleep deprivation and diminished insulin…
Alexander Hamilton – Monetary Policy, Debt & Inflation
During my sporadic research on Alexander Hamilton, I came across an interesting quote that I jotted down: A national debt, if it is not excessive, will be to us a national blessing. – Alexander Hamilton The reason, I found this quote so noteworthy was because it so succinctly seems to capture Alexanders views on a…
Futures Price: How Is It Calculated?
The Role of Futures Prices (Non-Commodity Markets) Contrary to what some may believe – futures prices are not a forecast of what the index price is going to be for the contract month. In truth, Futures prices are a mathematical calculation using key variables: The Formula Behind Futures Pricing The formula for calculating futures prices…
Deciphering Liquidity Conditions: The Balance Sheet Equation
Recently, a reader inquired about an increasingly-used metric for assessing general liquidity conditions. Let’s break it down mango-style, shall we? The Liquidity Equation The Liquidity Equation in question can be succinctly summarized as follows: Now, let’s unpack this equation: A: The Fed Balance Sheet When the Federal Reserve’s balance sheet expands, it directly pumps reserves…
Okun’s Law: Explaining GDP-Unemployment Relationship
Few concepts have stood the test of time quite like Okun’s Law. It’s a simple yet profound observation that offers a glimpse into the complex dance between a nation’s Gross Domestic Product (GDP) and its unemployment rate. The Core Tenet of Okun’s Law At its core, Okun’s Law is a straightforward empirical relationship that postulates…
Liquidity: Term Structure & Volatility
In a recent podcast, we had the privilege of gaining valuable insights from Michael Howel, renowned expert in tracking global liquidity. Michael Howel has repeatedly emphasized how we are now living in a world that is more of a refinancing mechanism; and the collateral needed to facilitate the refinancing becomes increasingly important. Term Structure: The…
Financial Repression, Inflation & Liquidation of Debt
In 2015, the IMF published a paper where they discuss the “Liquidation of Government Debt”. The paper specifically discusses financial repression as one of the ways to liquidate government debt. What is financial repression? Financial repression refers to government policies that aim to steer money towards government debt while keeping interest rates artificially low (below…