TLT looking really bad right now

[moda0306]

I think we need to define "price level."

Even if we could agree on what "money" consists of (fat chance), isn't price level measured most accurately by our current inflation measures?  You can't just throw the quantity iof money out there and call it a price level change, can you?

[kka]

Pointing to 2008 is not the same. The debt was less than half. The economy was much less inflation dependant. 2008 is an interesting example though. Did the money supply even contract at all to cause the crash? I think the rate of increase just slowed for a little bit. And look what they came back with. A huge expansion of M1 to keep, let's call it M3 from contracting. They have to keep uping the ante.

There was massive deleveraging (reduction in total debt -- as gumby points out, government debt is a small fraction of total debt in our debt-based monetary system) during the crash, I think around 25%.

Is there an expiration date for your inflation prediction?  If by 2018, inflation as measured by http://bpp.mit.edu/usa/ remains under or near 3%, will you acknowledge that the next 5-year period was similar to the previous one and you were wrong?

You think the money supply decreased by 25%? Ok, I'd be interested to see that and would not dispute it. I just wasn't aware it was that severe. Sure it might have been. That would at least provide a good way to measure if a crash was coming. If anybody can say what the total drawdown in the money supply was prior to the top in the market that would be awesome. I doubt it would take as much of a reduction this time to crash it since it's 100% on inflation life-support at this point.

I haven't made an inflation prediction. I've just said that inflation is neccessary for the government to maintain it's interest payments and at current rates you're not going to get a long-term real return in LTBs.

So no, I think the price level could stay flat or fall from here. But that would mean rising rates or outright default. The last one might take a lot longer than 5 years...hard to say. The government could always try an asset sale. The last one is the only way out for them I think. Maybe they'll rent out the White House.

Regarding deleveraging, I can't find a chart with dollar amounts, but the household debt ratio decreased from 14.1% to 10.4% (26% decrease) since 2007 (see 3rd chart):
http://www.cliftonlarsonallen.com/Priva ... s-LLC.aspx

I disagree that inflation is necessary for the government to maintain its interest payments.  I used to be in the same boat as you regarding concerns about deficit spending, unfunded liabilities, rising interest rates, etc., but accepting the reality of how our monetary system actually works has forced me to relinquish those thoughts.

Now you say inflation may not occur, but interest rates must rise?  If by 2018, the 30-year treasury rate is still under say 5%, would you acknowledge you were wrong about that prediction?

[Kshartle]

1. We don't bid for goods & services with Tbills, we use dollars. More dollars + same amount of goods and services = higher general price level.

We don't use commercial paper or agency debt to bid on goods and services either, but they are included in MMFs that are part of M3 and broad liquidity.

If the money supply (M3) doubled tomorrow then so would the general price level.

So, in one breath only cash counts towards inflation. In the next breath M3 (which is overwhelmingly non-cash) counts toward inflation. Which is it? You can't have it both ways!

In any case, economists prefer Broad Liquidity over M3 these days when trying to gauge inflation. And T-Bills are already included in Broad Liquidity. The Fed swapping one kind of Broad Liquidity for another kind of Broad Liquidity is basically a non-event. It doesn't cause any meaningful inflation.

This from the guy who called Mosler a dummy or a liar. That's just my opinion of course, although I'm certain if I put in the time I could prove it.

By all means, go for it. Harder than you think.

Didn't realize T-bills were in M3. Please substitute money supply anytime I've said M3. Tbills are definately not money.

[Kshartle]

There was massive deleveraging (reduction in total debt -- as gumby points out, government debt is a small fraction of total debt in our debt-based monetary system) during the crash, I think around 25%.

Is there an expiration date for your inflation prediction?  If by 2018, inflation as measured by http://bpp.mit.edu/usa/ remains under or near 3%, will you acknowledge that the next 5-year period was similar to the previous one and you were wrong?

You think the money supply decreased by 25%? Ok, I'd be interested to see that and would not dispute it. I just wasn't aware it was that severe. Sure it might have been. That would at least provide a good way to measure if a crash was coming. If anybody can say what the total drawdown in the money supply was prior to the top in the market that would be awesome. I doubt it would take as much of a reduction this time to crash it since it's 100% on inflation life-support at this point.

I haven't made an inflation prediction. I've just said that inflation is neccessary for the government to maintain it's interest payments and at current rates you're not going to get a long-term real return in LTBs.

So no, I think the price level could stay flat or fall from here. But that would mean rising rates or outright default. The last one might take a lot longer than 5 years...hard to say. The government could always try an asset sale. The last one is the only way out for them I think. Maybe they'll rent out the White House.

Regarding deleveraging, I can't find a chart with dollar amounts, but the household debt ratio decreased from 14.1% to 10.4% (26% decrease) since 2007 (see 3rd chart):
http://www.cliftonlarsonallen.com/Priva ... s-LLC.aspx

I disagree that inflation is necessary for the government to maintain its interest payments.  I used to be in the same boat as you regarding concerns about deficit spending, unfunded liabilities, rising interest rates, etc., but accepting the reality of how our monetary system actually works has forced me to relinquish those thoughts.

Now you say inflation may not occur, but interest rates must rise?  If by 2018, the 30-year treasury rate is still under say 5%, would you acknowledge you were wrong about that prediction?

What prediction?

If I actually made a prediction about what I think would happen by 2018 and it didn't happen....I will 100% admit I was wrong.

Please be more specific. What prediction?

[Kshartle]

There was massive deleveraging (reduction in total debt -- as gumby points out, government debt is a small fraction of total debt in our debt-based monetary system) during the crash, I think around 25%.

Is there an expiration date for your inflation prediction?  If by 2018, inflation as measured by http://bpp.mit.edu/usa/ remains under or near 3%, will you acknowledge that the next 5-year period was similar to the previous one and you were wrong?

You think the money supply decreased by 25%? Ok, I'd be interested to see that and would not dispute it. I just wasn't aware it was that severe. Sure it might have been. That would at least provide a good way to measure if a crash was coming. If anybody can say what the total drawdown in the money supply was prior to the top in the market that would be awesome. I doubt it would take as much of a reduction this time to crash it since it's 100% on inflation life-support at this point.

I haven't made an inflation prediction. I've just said that inflation is neccessary for the government to maintain it's interest payments and at current rates you're not going to get a long-term real return in LTBs.

So no, I think the price level could stay flat or fall from here. But that would mean rising rates or outright default. The last one might take a lot longer than 5 years...hard to say. The government could always try an asset sale. The last one is the only way out for them I think. Maybe they'll rent out the White House.

Regarding deleveraging, I can't find a chart with dollar amounts, but the household debt ratio decreased from 14.1% to 10.4% (26% decrease) since 2007 (see 3rd chart):
http://www.cliftonlarsonallen.com/Priva ... s-LLC.aspx

I disagree that inflation is necessary for the government to maintain its interest payments.  I used to be in the same boat as you regarding concerns about deficit spending, unfunded liabilities, rising interest rates, etc., but accepting the reality of how our monetary system actually works has forced me to relinquish those thoughts.

Now you say inflation may not occur, but interest rates must rise?  If by 2018, the 30-year treasury rate is still under say 5%, would you acknowledge you were wrong about that prediction?

If you disagree then please enlighten us as to why. Just saying you disagree is really rude. It's not as rude as an ad hominem or pure name-calling but it's rude.

Disagree I am good with. I welcome it. I am ASKING for it. Only if you have a point to back it up though.

What boat am I in that you used to be in? Again guys.....this is more ad hominem. It's trying to say..."Ohhhh, I can't provide anything insightful to disagree but trust me....I used to think that way and now I don't so obviously your position is wrong".

Think it out.......you are a brilliant human being. I say that with zero malice. Think it out. There is a reason you disagree with me. There is a chance it's based on reason. Think about it and articulate it. You have all the time in the world and I am all ears.

[Gumby]

Didn't realize T-bills were in M3.

T-Bills are not in M3. I never said T-Bills are in M3. I said T-Bill are in "Broad Liquidity".

Please substitute money supply anytime I've said M3.

Nobody other than ShadowStats uses M3 anymore (or a nebulous undefined "money supply") for predicting inflation. M3 is not even published anymore — it's obsolete. Economists now use "Broad Liquidity" for gauging inflation (which includes T-Bills).

Tbills are definately not money.

You are really digging yourself into a hole here, because by your definition, savings accounts aren't money (they are usually invested in T-Bills and some private credit). Overnight repos wouldn't be "money" by your definition either. Nor would commercial paper. Nor would agency debt. Nor would money market funds or Treasury money market funds. And yet, most of our broad money supply is held as these debt instruments.

In economics, broad money is a measure of the money supply that includes more than just physical money such as currency and coins (also termed narrow money). It generally includes demand deposits at commercial banks, and any monies held in easily accessible accounts. Components of broad money are still very liquid, and non-cash components can usually be converted into cash very easily.

Source: http://en.wikipedia.org/wiki/Broad_money

The flaw in all your arguments is that you are using narrow money to predict inflation. But narrow money is a terrible way to predict inflation. It's absolutely useless. You need to look at the broad money supply — and that would include non-cash components that are still very liquid.

So T-Bills, commercial paper, agency debt and money market funds are not a "medium of exchange" (i.e. they are not what you would use to buy groceries). But they are very much a part of the Broad Liquidity that is used to gauge inflation.

[Kriegsspiel]

I have nothing constructive to add, since I am merely an egg, but this is a great thread. Thanks all.

[Gumby]

Ellen Brown, author of Web of Debt, explains...

[align=center]Swapping Government Bonds for Cash
Would Not Drive Up Consumer Prices[/align]

The idea that the government could liquidate the federal debt by simply printing up dollars and buying back its own bonds with them is dismissed out of hand by economists and politicians on the ground that it would produce rampant runaway inflation. But would it? Inflation results when the money supply increases faster than goods and services, and replacing government securities with cash would not change the size of the money supply. Federal securities are already money. They have been money ever since Alexander Hamilton made them the basis of the national money supply in the late eighteenth century. Converting federal securities into government-issued U.S. Notes would not cause prices to shoot up because consumers would have no more money to spend than they had before.

A "security" is a type of transferable interest representing financial value. The federal securities composing the federal debt (bills, bonds and notes) are treated by the Federal Reserve and by the market itself just as if they were money. Federal securities are traded daily in enormous volume among banks and other financial institutions around the world just as if they were money.[7] If the government were to buy back its own bonds with cash, these instruments of financial value would merely be converted from interest-bearing notes into non-interest-bearing legal tender. The funds would move from M3 into M1 (cash and checks), but the total money supply would remain the same.

Policy-makers track inflation by looking at the widest measure of the money supply, called "broad liquidity." According to Investopedia (an online investors' encyclopedia):

Broad Liquidity [is] a category of the money supply which includes: all funds in M3, individual holdings in accounts, savings bonds, T-bills [Treasury bills] with maturity of less than one year, commercial papers, and banker's acceptances.[8]

"Broad liquidity" thus includes most government securities. Longer-term securities are not technically included in this definition, but the principle still holds: cashing them out would not affect consumer prices, because the money supply would not increase and the bondholders would have no more spending money than they had before. Consider this hypothetical:

You have $20,000 that you want to save for a rainy day. You deposit the money in an account with your broker, who recommends putting $10,000 into the stock market and $10,000 into corporate bonds, and you agree. How much money do you have in the account? $20,000. A short time later, your broker notifies you that your bonds have been unexpectedly called, or turned into cash. You check your account on the Internet and see that where before it contained $10,000 in corporate bonds, it now contains $10,000 in cash. How much money do you have in the account? $20,000 (plus or minus some growth in interest and fluctuations in stock values). Paying off the bonds did not give you an additional $10,000, making you feel richer than before, prompting you to rush out to buy shoes or real estate you did not think you could afford before, increasing demand and driving up prices.

7. William Hummel, "Zeroing the National Debt," Money: What It Is, How It Works, http://wfhummel.net (March 3, 2002).

8. "Broad Liquidity," investopedia.com (2006).

Source: http://www.webofdebt.com/articles/feder ... crisis.php

Make sense?

Ellen Brown wrote that in 2007 — and she correctly predicted that the trillions of dollars in QE swaps would not result in any meaningful inflation.

Six years later, she is still correct. The swaps were pretty much non-events — nobody feels any richer from the QE swaps. The Fed could liquidate all $16 trillion of the US debt and it still wouldn't make a difference. Nobody would be any richer after the fact.

[kka]

You think the money supply decreased by 25%? Ok, I'd be interested to see that and would not dispute it. I just wasn't aware it was that severe. Sure it might have been. That would at least provide a good way to measure if a crash was coming. If anybody can say what the total drawdown in the money supply was prior to the top in the market that would be awesome. I doubt it would take as much of a reduction this time to crash it since it's 100% on inflation life-support at this point.

I haven't made an inflation prediction. I've just said that inflation is neccessary for the government to maintain it's interest payments and at current rates you're not going to get a long-term real return in LTBs.

So no, I think the price level could stay flat or fall from here. But that would mean rising rates or outright default. The last one might take a lot longer than 5 years...hard to say. The government could always try an asset sale. The last one is the only way out for them I think. Maybe they'll rent out the White House.

Regarding deleveraging, I can't find a chart with dollar amounts, but the household debt ratio decreased from 14.1% to 10.4% (26% decrease) since 2007 (see 3rd chart):
http://www.cliftonlarsonallen.com/Priva ... s-LLC.aspx

I disagree that inflation is necessary for the government to maintain its interest payments.  I used to be in the same boat as you regarding concerns about deficit spending, unfunded liabilities, rising interest rates, etc., but accepting the reality of how our monetary system actually works has forced me to relinquish those thoughts.

Now you say inflation may not occur, but interest rates must rise?  If by 2018, the 30-year treasury rate is still under say 5%, would you acknowledge you were wrong about that prediction?

What prediction?

If I actually made a prediction about what I think would happen by 2018 and it didn't happen....I will 100% admit I was wrong.

Please be more specific. What prediction?

Earlier in this thread, you stated:

I think long-term all rates are going up, that includes dividend rates. I think long-term we're going to stocks and bonds (even treasuries) drop the negative correlation they've had for a while now. Time will tell.

I absolutely think these higher yields are going to crash housing and the economy is going to get very bad. I think we're going to see stagflation (higher prices, rising yields, tepid stock appreciation, more unemployment etc.)...

and

...I have no idea what the yield will be in 2 years. I think it will be higher but.....

Now 5 years...........much higher or the dollar will have dropped because of the FED. Maybe both.

So you predicted that in 5 years, long-term treasury rates will be much higher.  Since they're currently around 4%, surely "much higher" must mean higher than 5%, right?  How much is much higher?

[Kshartle]

If you disagree then please enlighten us as to why. Just saying you disagree is really rude. It's not as rude as an ad hominem or pure name-calling but it's rude.

You mean like this?

I have read Mosler he is either dumb dumb dumb or lying.

If I thought Mosler was actually going to read this....then yeah....very rude. Something tells me he's not going to read this though. It would be great if he did.

[Kshartle]

Didn't realize T-bills were in M3.

T-Bills are not in M3. I never said T-Bills are in M3. I said T-Bill are in "Broad Liquidity".

It's impossible to keep up with the topic changes with you. It's practically every single post. What is your point about "Broad lidquidity" and what does "Broad liquidity" have to do with any of the discussion thus far?

[Gumby]

Didn't realize T-bills were in M3.

T-Bills are not in M3. I never said T-Bills are in M3. I said T-Bill are in "Broad Liquidity".

It's impossible to keep up with the topic changes with you. It's practically every single post. What is your point about "Broad lidquidity" and what does "Broad liquidity" have to do with any of the discussion thus far?

See the Ellen Brown quote, above, and respond accordingly. And remember, if you disagree you have to explain why you disagree or it's "rude".

[Kshartle]

Nobody other than ShadowStats uses M3 anymore (or a nebulous undefined "money supply") for predicting inflation. M3 is not even published anymore — it's obsolete. Economists now use "Broad Liquidity" for gauging inflation (which includes T-Bills).

Ok I said please sub in money supply anytime I said M3. I swear I will try my best to never say M3 again. I can't keep up with the stupid name changes. Let's just call it the money supply. ooohhh wait....let's call it "broad liquidity". Can't wait to go spend a bunch of "broad liquidity" this weekend. Christ.

T bills are not money. The only thing I'm aware of that you can buy with T-bills is dollars. For purposes of this discussion I think we are agreeing that dollars are money. So you can trade T-bills for money just like you can trade anything else for money. But you can't trade T-bills for stuff. You gotta convert to money (dollars). So they ain't money (dollars).

Think on this....T-bills are an obligation of the government. The fundamental difference between them and T-notes or T-bonds is maturity date. That and they are zero coupon but this is immaterial. Why on Earth would a government obligation go from being non-money to money based on date to maturity? Answer is that they don't. They aren't money any more than a 100 year bond would be.

[Kshartle]

The flaw in all your arguments is that you are using narrow money to predict inflation. But narrow money is a terrible way to predict inflation. It's absolutely useless. You need to look at the broad money supply — and that would include non-cash components that are still very liquid.

So T-Bills, commercial paper, agency debt and money market funds are not a "medium of exchange" (i.e. they are not what you would use to buy groceries). But they are very much a part of the Broad Liquidity that is used to gauge inflation.

What can you buy with your commercial paper, agency debt and money market fund other than dollars? Assuming you can trade them for dollars....did those dollars exist already? Did the company, bank or agency have dollars for you, or did they create them out of thin air?

You said the flaw in my argument. What's my argument?

[Mdraf]

Exactly. As I have said before T-Bills, T-notes and T-bonds are a promise to pay in the future. As such they are not money for exactly the same reason why a check is also not money, it's an instruction to a bank.  If your savings account is in treasuries it is also not money. The bank has to sell them in order to give you money.

And since a promise to pay in the future is not money it is less valuable than money. That's why it demands interest. 

All the jargon being thrown around doesn't change these basic facts.

[Gumby]

But you can't trade T-bills for stuff. You gotta convert to money (dollars). So they ain't money (dollars).

You are confusing "medium of exchange" and "money".

CDs aren't money by your definition — since you can't trade CDs for stuff.

Commercial Paper isn't money by your definition — since you can't trade Commercial Paper for stuff.

Agency Debt isn't money by your definition — since you can't trade Agency Debt for stuff.

Money Market Funds aren't money by your definition — since Money Market Funds are composed of Commercial Paper and Agency Debt.

Treasury Money Market Funds aren't money by your definition — since you can't trade government debt for stuff.

What you've done is confused a medium of exchange for money. All of the things I mentioned above are different forms of non-cash that are highly liquid (i.e. broad liquidity) and make up the majority of our money supply. You fail to understand that only a fraction of our money supply is an actual medium of exchange (i.e. narrow money).

Stop conflating narrow money and broad money. You can't predict inflation by looking at narrow money. It's useless.

[Kshartle]

Regarding deleveraging, I can't find a chart with dollar amounts, but the household debt ratio decreased from 14.1% to 10.4% (26% decrease) since 2007 (see 3rd chart):
http://www.cliftonlarsonallen.com/Priva ... s-LLC.aspx

I disagree that inflation is necessary for the government to maintain its interest payments.  I used to be in the same boat as you regarding concerns about deficit spending, unfunded liabilities, rising interest rates, etc., but accepting the reality of how our monetary system actually works has forced me to relinquish those thoughts.

Now you say inflation may not occur, but interest rates must rise?  If by 2018, the 30-year treasury rate is still under say 5%, would you acknowledge you were wrong about that prediction?

What prediction?

If I actually made a prediction about what I think would happen by 2018 and it didn't happen....I will 100% admit I was wrong.

Please be more specific. What prediction?

Earlier in this thread, you stated:

I think long-term all rates are going up, that includes dividend rates. I think long-term we're going to stocks and bonds (even treasuries) drop the negative correlation they've had for a while now. Time will tell.

I absolutely think these higher yields are going to crash housing and the economy is going to get very bad. I think we're going to see stagflation (higher prices, rising yields, tepid stock appreciation, more unemployment etc.)...

and

...I have no idea what the yield will be in 2 years. I think it will be higher but.....

Now 5 years...........much higher or the dollar will have dropped because of the FED. Maybe both.

So you predicted that in 5 years, long-term treasury rates will be much higher.  Since they're currently around 4%, surely "much higher" must mean higher than 5%, right?  How much is much higher?

Yes I wil 100% admit I'm wrong if yields are not much higher AND the dollar hasn't dropped in value. This isn't much of a prediction though honestly. Does anyone out there think a dollar will be as valuable 5 years from now?

I've said it's possible, a big deflation/dollar rally but part of the cost will be much higher rates. I don't know.....let's say if there is no depreciation of the dollar in 5 years I bet the 30 year rate is at least 7%. I'd say that is extremely likely, IF the dollar hasn't lost value. If the dollar is as strong or stronger and 30 rates are still under 7% then my prediction is wrong and I'll admit that.

I'd also say if you ask me or anyone to predict the outcome of any market in 5 years the chance of getting it correct is extremely small....unless the prediction is ridiculously simple.

[Gumby]

Exactly. As I have said before T-Bills, T-notes and T-bonds are a promise to pay in the future. As such they are not money for exactly the same reason why a check is also not money, it's an instruction to a bank.  If your savings account is in treasuries it is also not money. The bank has to sell them in order to give you money.

And since a promise to pay in the future is not money it is less valuable than money. That's why it demands interest. 

All the jargon being thrown around doesn't change these basic facts.

They are all examples of broad money. Only broad money is used to gauge inflation — not narrow money. Narrow money is just the money that we use as a medium of exchange, but it's never used to gauge inflation. Never.

[Kshartle]

T-Bills are not in M3. I never said T-Bills are in M3. I said T-Bill are in "Broad Liquidity".

It's impossible to keep up with the topic changes with you. It's practically every single post. What is your point about "Broad lidquidity" and what does "Broad liquidity" have to do with any of the discussion thus far?

See the Ellen Brown quote, above, and respond accordingly. And remember, if you disagree you have to explain why you disagree or it's "rude".

Pretty lazy to post lengthy quotes from other people and ask people to respond to them. Can you summarize?

I would never say I disagree and not provide an explanation.

[Mdraf]

You can't predict inflation by looking at narrow money. It's useless.

Explain please why so?

[Kshartle]

T-Bills are not in M3. I never said T-Bills are in M3. I said T-Bill are in "Broad Liquidity".

It's impossible to keep up with the topic changes with you. It's practically every single post. What is your point about "Broad lidquidity" and what does "Broad liquidity" have to do with any of the discussion thus far?

See the Ellen Brown quote, above, and respond accordingly. And remember, if you disagree you have to explain why you disagree or it's "rude".

I read it. Can you summarize any point you would like a comment on?

[Gumby]

It's impossible to keep up with the topic changes with you. It's practically every single post. What is your point about "Broad lidquidity" and what does "Broad liquidity" have to do with any of the discussion thus far?

See the Ellen Brown quote, above, and respond accordingly. And remember, if you disagree you have to explain why you disagree or it's "rude".

I read it. Can you summarize any point you would like a comment on?

Yes. How about the title of her quote:

[align=center]Swapping Government Bonds for Cash
Would Not Drive Up Consumer Prices
[/align]

She clearly explains it, with sound logic and reason.

[Mdraf]

She clearly explains it, with sound logic and reason.

Here is why she is wrong:

http://www.garynorth.com/public/7028.cfm

He clearly explains it, with sound logic and reason

[Kshartle]

Stop conflating narrow money and broad money. You can't predict inflation by looking at narrow money.

I know I said 12 earlier....but honestly it's like you're 10 years old and reading definitions from an econ dictionary, or posting quotes from some "Famous idiot economists" book.

Every post is something new like some video game that has endless boards....none more difficult than the last but it's all randomly generated and had no end ever. No end boss. The story never ties together. You lose all sense of why you're even playing/typing. You beat every board but then there's another. Totally random. Sometimes it doesn't even look like the same game but it's as pointless and its from the same cartridge.


You are either a kid or troll. If you're a kid....ok....dude some advice, interject less and observe more, in time you'll add to the discourse.

If you're an adult......dude stop trolling.

[Kshartle]

Gumby,

Posting quotes and asking people to comment on them is fine.

Posting them as some type of rebuttal....is pitiful. It tells the other person that you Gumby don't even understand the concept of the quote. Either that or you are extremely selfish and rude. Have the courtesy in a conversation to summarize your points for people, make them readable and understandable, if you want people to regard them at all.

If you don't understand a concept then maybe ask the group to discuss and try to think about it yourself. It's cool to get opinion from others you aren't in contact with like an author or anything. We all need to be doing that I think. It's just not cool to try to constantly stifle what could be interesting conversation with never-ending topic changing, strawmen, ad whatever and all the rest and top it off with lengthy quotes or article posts.

People would rather here what you actually think on a thread like this and buzz right through the quote and not click the article.