Zoltan Pozsar Calls For Bretton Woods III | Joseph Wang
Apr 6, 2022
55:37
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Quick takeaways
Central banks cannot solve global economic problems beyond money market issues and certain financial crises.
Zoltan Pozsar proposes a potential shift towards a new monetary order with Bretton Woods 3.0, considering the relationships between money, prices, interest rates, and foreign exchange.
Increased margin requirements due to commodity market volatility have led to liquidity issues for specific players, but it is unlikely to become systemic.
Deep dives
The argument that central banks can print money but can't fix global economic problems
The podcast episode discusses the argument that central banks have the ability to print money but are unable to solve global economic problems. While central banks can address money market issues and certain financial crises, they cannot fix problems like high oil prices or geopolitical risks.
Zoltan Pozsar's complex and broad-ranging thesis on Bretton Woods 3.0
The episode explores Zoltan Pozsar's thesis on Bretton Woods 3.0, which suggests a shift towards a new monetary order with a potential split in the global system. Pozsar analyzes the issue through the lens of money and the relationships between prices, interest rates, and foreign exchange. He also examines the impact of disruptions in the real economy and the challenges central banks face in addressing them.
The liquidity squeeze in the commodity market and the role of credit lines
The podcast delves into the liquidity squeeze in the commodity market, particularly in relation to credit lines extended by banks to commodity players. The volatility in commodity prices has led to increased margin requirements, causing liquidity issues for producers and traders. While this poses challenges, it is unlikely to become systemic, as it primarily affects specific players rather than the entire market.
The impact of quantitative tightening on the yield curve
The episode highlights the potential impact of quantitative tightening (QT) on the yield curve. The host and guest discuss how QT can steepen the curve rather than flatten it, as the Federal Reserve plans to reduce its balance sheet and raise interest rates. They also touch on the likelihood of foreign investors continuing to buy US Treasuries and the influence of central bank policies on yield curve control.
The future trajectory of interest rates and Joseph Wang's inflationary outlook
Joseph Wang shares his view on the future trajectory of interest rates, predicting that the 10-year yield will reach 4% by the end of the year. He also discusses the potential impact of interest rate hikes on stocks and bonds, emphasizing the inherent trade-offs and the need for transparency in communicating the potential consequences of monetary policy decisions.
Blockworks' Jack Farley, Host of Forward Guidance goes LIVE with Joseph Wang to discuss Zoltan Pozsar's recent Global Money Dispatch titled 'Money, Commodities, and Bretton Woods III'.
Read Money, Commodities, and Bretton Woods III here: https://plus2.credit-suisse.com/shorturlpdf.html?v=51io-WTBd-V
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