We Study Billionaires - The Investor’s Podcast Network TIP279: Stock Market Melt-up w/ Luke Gromen (Business Podcast)
Jan 26, 2020
In this discussion, Luke Gromen, a macro expert and author of "Mr. X Interviews," unpacks the intricacies of the stock market. He explains how the Federal Reserve's balance sheet impacts inflation and why it remains committed to financing U.S. deficits. Gromen also tackles misconceptions about inflation and the risks of hyperinflation. Additionally, he explores the dollar's relationship with global economics and the potential shift towards cryptocurrencies in finance. His insights offer a fresh perspective on navigating today's financial landscape.
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Economy and 10-Year Yields
- The US economy struggles with 10-year yields above 3-3.25%, its effective policy rate.
- The Fed may increase its balance sheet rapidly even with rates above zero, potentially causing inflation.
Fed's Commitment to Financing Deficits
- The Federal Reserve is committed to financing US deficits through the banking system.
- This is evident in the close correlation between the Fed's balance sheet growth and US debt growth since September.
Short-Term Debt Issuance
- The US government issues a large portion of its debt short-term, despite high demand for long-term bonds.
- This suggests a lack of sufficient demand for long-term US debt, highlighting a potential underlying weakness.
