How investors make money with carry trades, how central banks encourage such trades, and what are the dangers to financial markets and the economy when carry trades get too big. What Is a Carry Trade? Carry trades are investments in which the investor collects an income stream “as long as nothing happens,” as Tim Lee, Jaime Lee and Kevin Coldiron describe in their book The Rise of Carry. By nothing, the authors mean there is price stability in the underlying asset on which the carry … [Read more...]
270: Repo Rates Soared—Here’s Why It Matters
How a liquidity crunch in the short-term lending markets sent interest rates soaring. Why this is a huge blunder on the part of the Federal Reserve, and what it means for us as individual investors. In this episode you’ll learn: What are repurchase agreements and how are they used to finance U.S Treasuries. How outflows from money market funds and hoarding by banks led to a liquidity crunch that caused repo rates to spike to 10%. Why banks are hoarding reserves held at the … [Read more...]
246: What Central Banks Don’t Know Should Concern You
Why an inverted yield curve is disconcerting given such low interest rates. Why those low rates could lead to radical central bank policies during the next recession. In this episode you’ll learn: What is an inverted yield curve and does it signal a recession is coming.What determines interest rates.What is the neutral equilibrium real rate of interest and why it matters.Why is the Federal Reserve considering make up strategies that allow inflation to rise up its 2% target and what … [Read more...]
206 Plus: The Upcoming Swiss Vote To Radically Change Money
This week May 26, 2018, we look at the upcoming national referendum in Switzerland to change the constitution so commercial banks can no longer create money. All money creation would reside with the Swiss National Bank. We analyze the potential consequences of this action if it is implemented. 206 Plus View and Listen To Other Plus Episodes Audio Download Download the audio file Notes Switzerland Campaign For Monetary Reform Transcript Welcome to Money For the Rest of Us Plus. This is … [Read more...]
205: Is The Federal Reserve Really Printing Money?
If the Federal Reserve has printed over $2 trillion dollar and given it to banks to lend, why is U.S. inflation still low? Photo by Pepi Stojanovski In this episode you’ll learn: How banks create money and how reserves factor into banks' lending decisions.How much has the money supply increased as a result of bank lending and Federal Reserve action.How Federal Reserve bond buying increased liquidity but not national wealth.Why we haven't seen higher inflation. Show … [Read more...]
204: Why Are Investment Returns So Low?
How low real interest rates contribute to low returns for stocks and other risk assets. How real interest rates are determined. Photo by Markus Spiske In this episode you’ll learn: How global stocks and bonds have performed historically.How real interest rates are predictive of asset class returns.How real interest rates are determined.Why low real rates suggest asset class returns will continue to be low. Show Notes NACUBO-Commonfund Study of Endowments Credit Suisse … [Read more...]
199: What Kind of Money Is It?
How a bank panic led to the creation of the Federal Reserve, and why having diversified sources of money can protect us in case we have a bank panic today and can't get access to our bank deposits. Photo by Annette Fischer In this episode you’ll learn: How a bank panic and economic crisis in 1907 led to the creation of the U.S. Federal Reserve in 1913.How U.S. currency evolved after the establishment of the Federal Reserve.How currency, bank deposits, gold and Bitcoin … [Read more...]
162: Is Inflation A Good Thing?
What causes inflation and why do central banks allow it to persist instead of having a 0% inflation target. Photo by Aaron Burden In this episode you’ll learn: How inflation erodes purchasing power over time. How money creation by banks causes inflation. What is the non accelerating inflation rate of unemployment. How shorter-term rates influence longer-term rates. Why central banks have inflation targets. Show Notes Did Quantitative Easing Work? - Federal … [Read more...]
MNY148 Plus: Model Portfolio Changes, Moving Averages and Central Banks
This week March 11, 2017 on Money For the Rest of Us Plus we review the rationale for the model portfolio changes that reflect more defensiveness regarding fixed income. We look at how an investor who is an entirely in cash should decide what to do in the current market environment. We also review what it means to say central banks are accommodative and how the stock market has performed when rates are rising and when momentum is bearish. Finally, we look at how to interpret trend data … [Read more...]
MNY094 Plus: Banks, Loans, and Smart Beta Conditions
This week on Money For the Rest of Us Plus I discuss how central banks influence lending, what is causing the bank stock sell off, and what are some future enhancements to the Hub pertaining to smart beta and investment conditions. The episode length is 17 minutes. … [Read more...]
