Making Sense

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Fed researchers conclude QE weakens the financial system. Also, Eurodollar Futures pierce the monetary shadows. Lastly, government stimulus is overhyped.

Show Notes

"I glanced at the list, running over names (probably misspelled) that meant nothing to me, with my hand on the butt of my righthand gun. That one now contained a very special load. According to Vannay, there was only one sure way to kill a skin-man: with a piercing object of the holy metal. I had paid the blacksmith in gold, but the bullet he’d made me – the one that would roll under the hammer at first cock – was pure silver." The scene is from The Wind Through the Keyhole, a 2012 Stephen King novel. It's not unheard of for the horror/fantasy-master's characters to call on silver to battle something from the dark and murky gray.

From his 1986 novel, IT: "But that, of course, is only a joke, and not a very good one; there is only one story left, at least one he remembers, and that is the story of the silver slugs – how they were made in Zack Denbrough's workshop on the night of July 23rd and how they were used on the 25th." A great yarn, to be sure, but as members of an advanced civilization we KNOW there's nothing in the shadows with blood-red eyes and tentacles. Then again... that's precisely why Count Dracula moved to cosmopolitan London in Bram Stoker's 1897 classic.

You see, the superstitious peasants of Transylvania knew the preternatural was real. Not so post-Enlightenment England where mucus-oozing pores and frightful claws were disclaimed. And what better place to hide disgusting aberrations, but in the shadows of denial and willfully forgotten knowledge?

Today, enlightened monetary-scientists placate us with soothing expectation policies that the shadows harbor no ill-proportioned beasts. But supposing there were. Is there a silver bullet we could roll under the hammer? In Part 2 of this, the 62nd Episode of Making Sense, Jeff Snider discusses one candidate: the Eurodollar Futures market. But first, two researchers for the Federal Reserve uncover the horror of quantitative easing. Then we conclude with the fantasy of government stimulus.

01: Two Federal Reserve researchers claim the Fed, "can effectively reduce the [fragility] of the financial system by reducing the size of its balance sheet." REDUCING, not growing! To understand their conclusion we discuss: money dealers, interbank loans and collateral.

02: If there was A SILVER BULLET, if there was ONE RING TO RULE THEM ALL - if there was ONE MARKET TO FOLLOW to track the health of the global monetary order and world economy - it would be the Eurodollar Futures market. Incredibly, the Federal Reserve has a very low opinion of it.

03: The 2007-09 crisis was a permanent shock. Neo-Keynesians do not believe such a thing is possible. But consumers? Not only do they believe in permanent shocks, they KNOW they are very real. Therefore, the Trump and Biden stimulus payments have NO CHANCE of fixing the economy.

---------SEE IT-----------
Alhambra YouTube:
Emil YouTube:

---------HEAR IT----------

Seeing Interest Rates Counter To What They Actually Are:
Federal Reserve - What Drives U.S. Treasury Re-use?:
How Does Reflation Look From The Point of View of the One Market That Gets It:
Yes, Curves Have Been Forced To Speak Japanese:
Data Downgrading Uncle Sam’s Helicopter:

Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski. Art by David Parkins. Podcast intro/outro is "Shadow of a Gunman" by Sight of Wonders and "Night Remains" by Farrell Wooten at Epidemic Sound.

What is Making Sense?

Discussing the function and malfunction of the global monetary order and its consequences on finance, economics, politics and society.