Generational Dynamics Forum - New Site

Will a spoonful of monetary sugar help the medicine go down? On Sunday evening, the Federal Reserve and a quintet of other central banks celebrated the shotgun wedding of Credit Suisse and UBS by announcing that they will conduct daily – rather than weekly -- standing U.S. dollar swap auctions at least through the end of April, introducing an “important liquidity backstop to ease strains in global funding markets,” as the press release put it.

The revival of a daily dollar facility, last used during the harrowing early days of the pandemic, comes as conditions in the Treasury market turn increasingly precarious: The ICE Bof A Move Index, which tracks volatility in that $24.6 trillion asset class, remains at extremes surpassing the chaotic March 2020 epoch. Likewise, trading volumes registered at roughly double their normal levels as of mid-week per strategists at BMO Capital Markets, while dealers relayed to The Wall Street Journal Wednesday that spreads between bid and offer prices on Treasurys and related derivative products had widened sharply relative to levels seen earlier in March.

Thus, the white-knuckle price action in the short end of the curve last week, as two-year yields bounded to 3.81% from 4.6% while moving at least 17 basis points during session, underscored the fragile state of play. “We’re one crisis away from a complete breakdown of Treasury market liquidity,” Priya Misra, head of global rates research at TD Securities, warns the Financial Times.

A slowdown in activity within corporate credit compounds those ominous tidings. Not a single deal priced within the U.S. investment grade realm over the six trading sessions through Friday, the longest non-holiday induced shutout since June. After a pair of issuers managed to break that drought this morning, high-grade supply stands at roughly $57 billion in the month-to-date, Bloomberg notes, well below the $155 billion that Wall Street had anticipated coming into March. Meanwhile, the most recent U.S. junk bond deal priced on March 2, while a net 44.8% of domestic banks reported tightening credit standards on commercial and industrial loans to large and middle-market firms, the Fed’s January survey of senior loan officers found. That ratio approaches the most stringent in recent memory, outside of the 2001 and 2008 recessions, as well as the 2020 crucible.

Accordingly, the Federal Open Market Committee’s Wednesday rate decision looms large, as still-raging inflation and a brewing banking crisis offer countervailing policy arguments. As of this morning, interest rate futures priced in 61% odds of a 25-basis point hike to the Funds rate, with a stand-pat outcome representing the minority view according to the CME Fed Watch tool. Compared to the 80% chance of a 50-basis point hike seen on March 8, two days before the demise of Silicon Valley Bank, the near-tossup outcome leaves central bank watchers on edge. “Since forward guidance began in 1994, there has not been a meeting with this much uncertainty so close to the meeting,” Bianco Research concludes.

Investors may need to buckle up, if one intragovernmental outfit gets its way. On Friday, the Organization for Economic Co-operation and Development raised their forecasted GDP growth to 1.5% in the U.S. and 2.6% worldwide this year, up from 0.5% and 2.2%, respectively, in November. A hawkish policy recommendation complemented those relatively upbeat growth assumptions: “We still think that, knowing what we know today, the priority has to be fighting inflation,” OECD chief economist Álvaro Pereira told the WSJ. “This isn’t 2008. We don’t see systemic risk at this stage.” Referencing the ECB’s decision to press ahead with a 50-basis point hike last week, despite the unfolding drama surrounding Credit Suisse, Pereira declined to hedge his bets. “It was absolutely the right decision,” he contended.

Higgenbotham wrote: Tue Mar 21, 2023 11:50 am Anyway, the reason I've been thinking about the pet "industry" is I've been wondering if, once people can no longer afford to feed their pets or have pets, whether wild dogs will be a problem in the coming dark age or what will happen to these tens of millions of dogs.

Armenia's war for territory is spinning out of control

By Georgie Anne Geyer

Baltimore Sun

Feb 22, 1993 at 12:00 am

WHILE THE American electorate focuses on domestic economic matters and steers away from foreign affairs, in certain tragic corners of the world events are occurring that confound the human mind.

If one looks at the case of Armenia today, one can hardly believe what one is seeing and hearing. Armenia is "returning to the Dark Ages." Armenia is "dying" as a nation. "We're past the crisis stage," says Harut Sassounian, executive director of the United Armenian Fund. "The country has collapsed."

Indeed, the little nation of 3.3 million people sandwiched between Turkey (a historical enemy), Azerbaijan (a slightly less noxious enemy) and Georgia (a collapsing non-enemy) is in what appears to be the final throes of misery.

Armenians sit without heat this brutal winter because Azerbaijan has embargoed oil supplies. There is little food and almost no light. Criminal "mafiosi" have taken over the country; packs of starving wild dogs roam the empty streets attacking and sometimes eating people.

Higgenbotham wrote: Tue Mar 21, 2023 11:37 pm This Dark Age Hovel was created for the above type of post. Probably fewer than 1% of the people reading the Financial Topics thread would have any interest in that kind of post. I think how and where somebody spends their 20s has huge impacts on their view of the world decades hence. Most young people are sponges soaking up information and the hard conclusions come later based on those experiences. I spent my 20s working night shifts in factories, one of which even employed prisoners from the Dubuque Penitentiary and people on the welfare to work program. The broken down factory town mentioned had already lost its job base to Japan and Korea. It was 35 years ago that I had fleeting thoughts about what might happen if China got into the act. When they did, that was a data point to refer back to. One day a Cadillac with a young couple probably no more than 22 years of age in the front seat and 4 kids in the back seat popped out a year apart to get maximum AFDC (Aid to Families with Dependent Children) benefits stopped to talk to me and I had fleeting thoughts about what the composition of the work force would be like in 35 years and whether the government would be bankrupt from paying out all those benefits. That was another data point to refer back to. Same with that dangerous loose Rottweiler. I'm well aware that most other people never saw these things, never thought about what might happen as a result, and have different data points to look back on as current events happen. Maybe some were at Microsoft creating "great technology". Everyone has their own data points and people overweight what they have experienced. It may be relevant or it may not be.

Good morning. It’s Wednesday, March 22, and we’re reading this wild story about a crew whose ship was sunk by a whale. Now let’s catch up.

The Fed will decide whether to raise interest rates again today.
What to know: The nation’s central bank has been hiking rates for a year now, because that’s one of the only ways the Fed can bring down rising prices.
But it’s become more complicated: The rate hikes helped fuel the banking turmoil of the past two weeks — including the second-largest bank failure in U.S. history.
What to expect: Probably another rate hike, even though economists disagree about whether that’s the right move. Also, the chairman of the Fed will answer questions.
Read this story

The U.S. said it will send tanks to Ukraine sooner than expected.
The details: M1 Abrams tanks will get there by the fall, the Pentagon said yesterday. Initially, officials said it could take up to two years.
The bigger picture: This came as Russian President Vladimir Putin and Chinese leader Xi Jinping held talks in Moscow, raising fears that Beijing could give military aid to Russia.
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Another powerful storm slammed into California yesterday.
What to know: Damaging winds, heavy rain and flooding rocked the Bay Area and just to the south. More than 200,000 customers lost power yesterday and at least one person died.
What’s next: The same storm is dragging an atmospheric river toward Southern California. Today’s forecast includes heavy rain, snow and strong winds.
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Idaho is preparing to allow firing-squad executions.
The details: A bill passed the state Senate this week and is expected to be signed into law. Idaho would become the fifth state to do this.
Why? Drug supply issues and botched procedures have made lethal injections problematic. Idaho hasn’t been able to execute a prisoner since 2012, and the state is looking for other options.
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A deadly fungus is rapidly spreading in U.S. health facilities.
What is it? A yeast strain known as Candida auris. It poses a danger to medically fragile people, including nursing home patients on ventilators and cancer patients undergoing chemotherapy.
How fast is it spreading? Infections from the fungus tripled nationally from 476 in 2019 to 1,471 in 2021. Early data from the CDC suggests the numbers have continued to rise.
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Japan won the World Baseball Classic last night.
What happened? Japan defeated the U.S., 3-2, in the final in Miami. Shohei Ohtani struck out his Los Angeles Angels teammate Mike Trout in an epic ending to the game.
The big picture: The World Baseball Classic is still establishing itself, but the commitment of players such as Ohtani, Trout and others has dramatically improved its credibility.
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Google launched its own AI chatbot yesterday.
What to know: It’s called Bard — Google’s answer to OpenAI’s ChatGPT. It can answer questions and have conversations on nearly any subject. We chatted with it here.
Why does this matter? Artificial intelligence is increasingly making its way into our lives. AI won’t entirely replace humans at work any time soon, but it’s already transforming some jobs.
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Higgenbotham wrote: Tue Mar 21, 2023 11:24 am A lot of people have been touting the theory that, as for the past several centuries of European nations and finally the US being passed the baton as the leading power, China will assume that role next. I don't think that will happen, which implies there has been no obvious replacement for the US dollar as world reserve currency as there was in the past when, for example, the US dollar was the obvious replacement for the British pound. It seems to me that the ramifications of the coming dark age where no power will replace the leading power have perversely allowed the dollar to hang on for awhile longer as the world reserve currency and the Fed and the US political establishment to get away with more bad behavior in their management of the currency than would have been "normal" in past cycles.

Higgenbotham wrote: Sat Dec 03, 2011 2:00 pm I'm going to make a novice attempt to define the difference between the beginning of a Dark Age and a typical fourth turning crisis era.

First attempt: A Dark Age is defined as the social and political breakdown of a regional or world hegemonic power which creates a power vacuum for which there is no clear and immediate successor.

Now I'll use Tuchman's words to further attempt to define a Dark Age.

"Mankind was not improved by the message. Consciousness of wickedness made behavior worse."

This is a clear distinction in my view and we are seeing Dark Age behaviors today, behaviors that have not been seen to this extent in seven centuries. As the financial crimes go unprosecuted, the consciousness of that knowledge has apparently increased the willingness to commit even bigger financial crimes.

"Rules crumbled, institutions failed in their functions. Knighthood did not protect; the Church, more worldly than spiritual, did not guide the way to God."

Another clear distinction. Today's dominant institution, the nation-state, which displaced the decrepit 14th century institutions, is failing in its functions, is not protecting, and is morally bankrupt.

"The towns, once agents of progress and the commonweal, were absorbed in mutual hostilities and divided by class war."

This hasn't happened yet, but the flash mobs, Anonymous and Occupy Wall Street movements are probably the beginning of the mutual hostilities and class war.

"The population, depleted by the Black Death, did not recover."

This hasn't happened yet, but if 14th Century timelines continue to hold, permanent population depletion will happen within 5 years and maybe 10 at the outside. It's already happened in the former Soviet Union.

"The war of England and France and the brigandage it spawned revealed the emptiness of chivalry's military pretensions and the falsity of its moral ones. The schism shook the foundations of the central institution, spreading a deep and pervasive uneasiness."

Already discussed somewhat above, and there does seem to be a deep and pervasive uneasiness.

"The oppressed were no longer enduring but rebelling, although, like the bourgeois who tried to compel reform, they were inadequate, unready, and unequipped for the task."

Already discussed somewhat above, and the Occupy Wall Street crowd, for example, clearly does seem inadequate, unready, and unequipped for the task of governance. If we are entering a Dark Age, it will be found that nobody can govern and part of the reason, I believe, is simply that the US as it exists is ungovernable. As mentioned before, I don't think any dictator in his right mind will want to take over the US and try to restore order because it can't be done. Also, see my definition above.

"They lived through a period which suffered and struggled without visible advance. They longed for remedy, for a revival of faith, for stability and order that never came."

I believe this in a nutshell is the future for the next several decades at least.

Higgenbotham wrote: Sat Dec 03, 2011 2:00 pm Now I'll use Tuchman's words to further attempt to define a Dark Age.

"The towns, once agents of progress and the commonweal, were absorbed in mutual hostilities and divided by class war."

Fortune

An economist who correctly predicted the Great Financial Crisis says the world’s central banks have chosen ‘class war over financial stability'

Story by Tristan Bove • Yesterday 4:53 PM

Marshaled by the U.S. Federal Reserve, central banks around the world have had a unifying philosophy over the past year: Bring down inflation no matter the cost, even if it means risking pain for people and businesses. But that approach has been questioned more than ever this month in the wake of several high-profile banking collapses in the U.S. and Europe. Now a British economist who predicted the 2008 global financial crash has escalated the issue, saying central banks prefer “class war over financial stability.”

John wrote: Wed Mar 22, 2023 9:48 am Chinese will never be a universal language,
like English has been for centuries.