Macro Voices MacroVoices #448 Luke Gromen: Why the Gold Recycling Trade is Accelerating
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Oct 3, 2024 
In this engaging discussion, Luke Gromen, founder of Forest for the Trees, shares his insights on macroeconomics. He delves into how recent Federal Reserve actions are impacting U.S.-China relations and the complexities of financial strategies. Gromen explores the tug-of-war between oil and gold markets, highlighting the benefits of nations investing in gold amidst inflation. Additionally, he analyzes the shifting dynamics of U.S. Treasury market volatility and the intertwined fates of different asset classes. Tune in for a captivating take on today's economic landscape!
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China's Stimulus and Potential US Coordination
- China's recent stimulus measures, following the Fed's rate cut, suggest potential coordination between the two nations.
- The yuan's rise against the dollar during stimulus indicates capital repatriation, contrary to expectations.
Fed Policy vs. Fiscal Reality
- The Fed's rate cuts contradict the Taylor Rule, which suggests they should be hiking rates.
- This deviation stems from the US's fiscal situation, requiring rate cuts to manage debt.
The Illusion of Treasury Demand
- Record foreign holdings of US Treasuries are misleading, driven by fickle hedge funds, not stable central banks.
- This shift to short-term, levered investments increases treasury market volatility and inflation.