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Viktor Shvets

lines on the record: 38
first: 2024-05-13
most recent: 2024-05-13
sittings or episodes: 1
sources: podcast

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“Rather than to their parents and grandparents. And so usually it starts with those types of demonstration. It doesn't really matter what the excuse is, whether it's a civil rights, whether it's a Cold War, whether it's Vietnam War, whether it's inequalities, whatever that is, something triggers it. But then as they get bigger and bigger part of the population, they really drive the policy. So today, late millenniums in Z are already almost 50% of the population, but they're only about 39% of the adults. They only 25% of the voters in the US mathematically, by 28, 29, there will be majority of adults. And by early to mid-2030s, there will be absolute majority of both voting and the adults. And so the question is, what type of policies, economic policies, political?”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“But it also degrades both your pricing power and marginal pricing power. They found that politics become disoriented as that occurs. They found that democratic policies cannot solve the problem, extreme polarization. So they're in a mixture of technological, financial, and political revolution. And when you have that change, that generation thinks very differently. And eventually they become a very large cohort. And when they become a large cohort, they demand a change. Now, what baby boomers were asking for is not what this generation is asking for, but they're asking for change. And my view, the change, all the surveys that come out, the change they're asking is very much community-based, is very much community of equals, is very much government supported. In other words, harping to their grand-grandparents who lived in 1940s and 1950s.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“But whenever you have a major technological financial disruption, what happens is that you have, or whenever circumstances change massively for the better or for the worst, one generation cannot sleep into another generation. That's what happened to baby boomers compared to silent and GI generation. The baby boomers could not relate to their parents or to their grandparents. They had a radically different views what they wanted to do. And so the younger generation, anybody born sort of after sort of early 80s onwards, have a very different view of the world. And the reason they have very different view of the world because they did not experience the world where jobs were plentiful, where you've gone to college, you automatically had a good job. They found that the jobs degrade. They found the professional lives degrade. They found that technology gives you many tools.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, usually when you have generational replacement and everything is fine, like economies are fine, finances fine, technology is fine, there is no displacement politically or geopolitically, then one generation just slips into another, almost unnoticed. That's what happened to baby boomers and next generation. But whenever you have an”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“And the whole saying will start escalating beyond what you're trying to do. And at that point, we could potentially see zeroing out even of Chinese and Hong Kong assets. You can even see U.S. Department of Treasury arguing that they don't recognize, for example, the currency of Hong Kong dollar. So in extreme, you can have a very extreme outcomes, which I think are not likely so long as there is no, as I said, disasters occurring along the way.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“That consumers and businesses in the United States can benefit from. At the same time, what you're trying to do is reestablish as much contact as you possibly can. Because as Defense Secretary was saying back in Singapore, when Chinese refused to talk to him 18 months ago, he said, with the Soviets, we never agreed on anything, but we talked. And the same is here. You need to maintain the lines of conversation so that you know how far you can go, where you cannot go, how far you can push, how far you can bring it back. So what you try to avoid is a chaos. What you try to avoid, just slapping stuff all over the place, trying to pushing China too far. And at the same time, gradually, as I said, degrading it. Now, there is a possibility, and it is a small possibility right now, but there is a possibility that something horrible is going to happen either in Russia, Ukraine, or something horrible might happen across Taiwan Straits.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, what do you need to avoid is very dramatic moves? So, in other words, the last thing you want is to stop slapping tariffs on very primitive products. But remember, China mostly actually does low-grade stuff. People focus on cameras, et cetera. But a lot of China is basic chemicals, it's toys, it's that sort of stuff. So try to avoid displacing that trade as much as possible. Try to focus on the areas that are important for you strategically. And that's what Trump started to do, but very chaotically and what Biden administration have done very systematically over the last four years. Now, except that China trade will get rerouted. Now, the fact that suddenly Mexico and Vietnam became major partners of the United States have very little to do with capacity of those countries to actually produce it. It's a lot of Chinese trade gets rerouted through those places and accept that because you're getting some of the benefit of that, including sometimes better quality, lower prices.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Because China is the only market in the world and the only asset in the world where risk premium over the last several years have gone up are almost everywhere risk premium actually falls.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“In other words, give a little bit of freedom for people, both businesses and consumers and households. If there is pivot change, you still have to pay a price because one of the things I highlight is capital stock. IMF calculates it. And if you think of 2004, China had capital stock of, I forgot like $4 trillion. India had one. In 2028, they will have $105 trillion. US, for example, will have 70, 75. India will only have 6. So China absorbed over $100 trillion of depreciated capital in a couple of decades. When you absorb so much capital, which is entire world GDP, when you absorb so much capital so quickly, inevitably you have an indigestion period. So that indigestion period will be with you even if you make a policy pivot today. But what will happen if they do that? Risk premium will improve.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Currency. So when Japan ran into the wall, they just collapse overnight. China has close capital account. Currency is not convertible. Central bank is not independent. Actually, lost all the power pretty much. Commercial banks are not commercial and private sector is not really private. So when you're operating behind the wall garden, you can't have minsky moments. You can't just hit the wall and collapse. But what you can do, you can basically head increasing headwinds as you keep going. So if Japan operated Chinese system in 1990, they didn't have to go down. They could have survived until 96 or 97. But the longer you go with that, the worse it gets. And so they need to recalibrate. So recalibration, which is needed, change your policy settings quite dramatically. Number two, change your geopolitical stance quite dramatically in a sense stop trying to rebuild the world and change the world and change domestic policy.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“And so that's right. What Karl Marx used to call fictitious capital, capital that multiplies for its own sake without doing anything good to anybody else. And so if you take that mindset, and that is not the mindset of Western economists, but if you take that mindset, this sort of stern paternalistic attitude and the emphasis of what he described productive forces, you understand why they're reluctant to actually do anything about it. Now, eventually, as I said earlier on, the pressures has to rise and they will have to pivot. And we saw with COVID in late October, early November 2022, that he can pivot very, very quickly. That's why there was a disorderly opening after COVID. And so there is a possibility that there will be that moment when you actually will have the change. But the longer he waits, the worse it gets. And the reason is very simple. China is not Japan. Japan had an open capital account and fluctuating currency and conversion.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“The answer would have been no the best thing you can argue they relocated, but they don't create it. Who is creating value? And so for Ricardo or Adam Smith or even Quincy before that, the argument people who produce stuff, whether it was agriculture early on, whether it's manufacturing, whether it's technology. And so the emphasis seemed to be much more on supply. The emphasis seemed to be much more on production. The emphasis is to start to strengthen as Qi Xi Ping calls it productive forces, which is a classic Marxist argument, productive versus unproductive. Strengthen them. Put obstacle in front of people who you don't regard as productive. And they're incredibly suspicious of capital markets and finance. Right.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the ways I describe it is the way I look at Xi Shi Shi Shi Shi Shipping and the way I look at Chinese leadership right now, it's sort of a mixture, very stern paternalistic attitudes, you know, being soft is bad, suffering is good. That's one side of it. The other side of it is very classical economics and Marxist economics. They're effectively harping back to the day of Quincy, David Ricardo, Adam Smith, Karl Marx. And those people were not thinking of prices. They were thinking of value. Now, since late 19th century, economists abundant value. So we only look at the prices. So if you're a billionaire, you must have added value because prices telling you so you have. Classical economy says, no, this guy just captured somebody else's value. He didn't create value. And so if you take that mindset, who is creating value, who is destroying value? If you ask David Ricardo, does he think financial markets or capital markets value creative?”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Japan's extent to which Chinese economy and society perform to some extent. I mean, it also depends what happens in the US, of course. But if you just look at China, it depends on that. Because remember, nominal GDP in China already fallen from 10% to 4. Now, in other words, as you create more disinflation, as you saw in Japan, it is really nominal GDP that tells you the extent of the pressure. Now, if economy and society are geared towards a double digit normal GDP, if you can't raise it, inevitably pressure.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“What you can do, but without triggering a real conflict. So to me, that's a Cold War. You're walking a tritrop between degrading as much as you can your opponent without triggering something really nasty. And I think so far, to be fair, whether it's Janet Yellen, whether it's Blinken, whether it's Sullivan, I think they've done pretty good job of actually achieving that balance. Whether that can be maintained, however,”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Of state versus individual, whether it's role of state subsidies, trade rules, they want to change everything. So if China did not try to change the world, I think the extent to which the barriers would have come up would not have been as aggressive. But now China has a catch-22. Barriers will come up, which means it's harder to sell that excess capacity. You don't want to recognize the loss of the capital. And what you're trying to do is to go on a charm offensive. That's why a Chinese president is in Europe right now. From a US perspective, what US is trying to do is gradually grind China out of the Western system, but without dislocating refrigerator prices or without dislocating things that housewives are using. And the way you do it is starting from the top, starting from the high tag, and just keep moving and slowly grinding them out, slowly retarding their gross rates, at least relative to...”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Raise universal basic income. They already have universal basic income in China. Just raise it and equalize it across the country. So you either do that, but if you're not willing to do that, which they're not, then the only way you can do it is accept that you lost the capital and close the factories. And we will discover China potentially is much smaller country than what we thought it was. Or the other alternative dump that excess capacity onto other countries. But given the amounts of money involved, there is not much you can dump on Kazakhstan. So there is only UK European Monetary Union or EU, United States, Japan. There's very few places that can take that sort of capacity. And so what's happening, those countries are putting up barriers. Now, the reason they're putting up barriers is that China also wants to change the world. They want to redesign everything, whether it's human rights, information, whether it's”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Sinks like electric vehicles, robotics, automation, solar industry. If you go into smaller niches, you almost automatically create three times global demand, if not more. Now, at that point, they have very limited choices. Either they change their pivot their policies dramatically, send checks to people instead of building another factory.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“And the reason for that is very simple. China, just like Japan 70s, 80s, has a very high national saving rates. They're running at about 45%. Just like Japan in 70s, 80s could have put policies in place to consume it, but they didn't. Neither have China. And so the result is they must invest at least 42-43% of GDP. Think of the numbers. That's an equivalent of $9 to $10 trillion invested every year. It's double of GDP of Japan invested every single year. Now, if you're investing that sort of money, it doesn't really matter what you invest in. You create massive overcapacities. And if you go into niches, things like what Xi Shipping calls productive forces.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. Well, one of the saints I disagreed with almost everyone over the last two or three years. Remember the view was that China is running out of people and so China will be exporting inflation. Now my argument all along was China cannot export inflation. They're major export of disinflation.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Some other form of shocks in a system in order to drive it up. So if I'm correct that neutral rates have not changed and it's still 50 to 100 basis points real, then it must be coming off. As it comes off, deflator comes off, nominal GDP drops from, in the US, it's already down from 12% to 5.4%. As it starts dropping towards 4%, you can't keep policy rates at 5.5% unless you want to have a recession. That's the only reason to have it. So I'm still in the same camp except it's desynchronized or going back to Reserve Bank of Australia, it's violent how it moves. Also, one more point. In the US, inflation is really in pockets. In 22 or 21, even in early 23, it was all over the place. Right now it's just in pockets. So all you need to do is to bring those pockets down to a low level.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, my view is that neutral rate has not changed. Neutral rate is a long-term process. That's why all models are still showing that neutral rates in the U.S. are 50 to 100 basis points real, which means policy rates should be closer to 3, not 5.5 on that basis. But in the short term, you can have a spike in those neutral rates. Now, I do think neutral rate spike, despite the fact that models don't show it, I think it did spike. Now, the question is whether it's already coming off. or whether somehow we can keep neutral rate at a much higher level. One of the key elements there is productivity. Now, I'm not a buyer that there will be any productivity improvements. In other words, labor productivity or multi-factor productivity is not going to recover for at least 10 years, possibly even 20 years. Now, if you take a view that productivity is not going to drive it, then either you have to have much higher primary deficits continuing, or you have to have”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“What you saw over the last four months is that inflation started breaking in the UK, start breaking in Eurozone, start breaking in Japan. Disinflation got stronger in China as we progress. But in the US, it stuck and actually gone up a bit. Now, the question is whether that's something unique to United States, or whether, in fact, in the second half of 204, we're going to relieve what we had in the second half of 23. And the United States will join the rest of the world in a disinflationary trend. That's my base case. Now, what underpins it is neutral rates and productivity.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Overall deficits don't matter, primary deficits do, and the US happen to have the highest deficits. U.S. is now running about three, three and a half percent of GDP primary deficits. Europe is less than one. Japan is less than two. So if you have a higher primary deficits, you push up your neutral rates higher compared to, for example, European Monetary Union or Japan. Now, disinflationary trend in the global is still continuing. Now, if you think of G5 CPI, for example, when we were here last time in sort of late 22, early 23, the number was 5%. In March, it was 2.4. Now 2.4, it's only 2030 BIPs higher than it was over the previous 25 years. But the leadership changed. If you think of the second half of 23, decinlation”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the way I look at it, my argument was there will be no recessions in the US, there will be no recession globally because we don't have recession, there is nothing to recover from. So don't expect any significant recovery. That's why my global growth rates always pitched at around 2%, 2.5%, which is at least 75 basis points less than what we used to have on the previous decade and about 100 basis points less than what we used to have in the past. My view, as you correctly said, that as you have sort of misallocation of demand and supply curves, as we have destabilization of demand and supply curves gradually winds down, inflation should come out, no need for recession, no need for unemployment, but there is a price we pay and the price we pay, there will be no recovery and there will be more or less a circular stagnation argument globally. Some countries will grow a little bit faster than others, and that will be primarily driven by primary deficits.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Any old balance sheet commitments, all major ones. And so that effectively was five times global GDP. So that's what started. So if you were to ask one person at one time when that happened, it's really Paul Walker who created our debt and asset-based culture. Now, Greenspan in late 80s, all he did, he took Walker's idea and brought it to logical conclusion. And that was a Greenspan put, which Bernard and Yellen subsequently maintained.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Between savings and spending. In other words, US and the UK consistently in that spender, Germany, Netherlands, China, Korea, Japan consistently net sabre. And we've never really rebalanced it properly. So one of the side effects of that was that it became easier and easier to borrow, easy and easier to bring future consumption to the present, to maintain your lifestyle. It became easier and easier to multiply credit. Instead of having one instrument per asset, we can now have five instrument per asset, ten. And each one of those instruments can be leveraged yet again and yet again. And so all of that created massive amount of capital. I mean, if you think of the financial stability board, they try to calculate the overall level of financialization. They're usually behind time. They only have 2022 numbers. But essentially what they were showing about $500 trillion. And that's based on the net derivatives and not including”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, if you sing a Paul Walker, he's mostly known, of course, for squashing inflation. But if you go back in time, I think he's much bigger legacy, is creating that system of global recycling of capital and addiction to debt and addiction to asset prices. Prior to night, well, essentially what happened? We've deregulated the financial sphere. We've deregulated capital flow. The idea was that United States will take the money from other people and stimulate consumption and those other people will be buying treasury bonds, for example, in order to get returns to lower the cost for U.S. consumers, but also to reduce their currency and make themselves more competitive. Now, Paul Walker was expecting that currency eventualists will recalibrate this process, but they never did because nobody ever wanted to have an appreciating currency. And so we stuck in a world of accumulating, I guess, disparity.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“And the price we pay for it is as volatility of inflation rates. Is this volatility? It is volatility of the neutral rates. In other words, the way I describe it, risk does not disappear. It just migrates. So if you keep the market plus it, which is what we're doing, risk simply migrates somewhere else. It migrates into politics. It migrates into the social sphere. It migrates into geopolitics. And so we do pay a price. We do pay a price for this, but to argue that central bank is committing an error, furniture must be broken is wrong. Even if they commit the error, which is possible, they can unwind it in 30 seconds.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“That was only one asset price going wrong. If you think of GFC, that's really a bigger asset, but only one. Today, landmines are everywhere. And those landmines, each one of them could be bigger than the original GFC. And so the result is central banks really don't have a choice. So even if Federal Reserve does commit a policy error which is possible, they can unwind it in split second. The way I describe it in my notes is to say, let's assume you get up, get in the morning, say, oh my God, it's going to be terrible day by lunchtime. You know, it's okay. And by evening, let's have a dinner. And the whole thing just evaporated. Now, the key question, however, to ask, what price do we pay for it?”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Private capital, private debt, equivalent to what we have for Silicon Valley Bank. Are we going to have special policies for parity trade, basis trade, from some of the niches in a high yield market? Of course we are. So if you have too much capital, if you're repricing instantaneously, and if central banks are willing and prepared to plug the holes almost instantaneously, this is a world of no risk. In other words, the way I put it, if the risk is everywhere, the risk is nowhere. And if the risk is nowhere, then you can explain speculation. You can explain the gold price of Bitcoin. You can explain why high yields will be trading at only 3% spreads because there is no risk. And the reason central banks are doing it, not because they're greedy for power or anything else. There is no shadow deep state or anything like that. The reason they're doing it is because of the dangers of not doing it. If you think of...”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Your financial instruments globally against real underlying economies. And what you find, depending how you do off-balance sheet commitments, how you do derivatives, you could be looking five to ten times larger than the underlying economies. So we have plenty of capital. What it basically means, no matter what Federal Reserve does, it's very hard to tighten because that capital just keeps circulating, looking for diminishing returns. The second thing we have, and Bloomberg plays a great role in it, is that we have instantaneous repricing. So anybody, any word in the market, it's instantaneously gets repriced. And the third thing we have is that central banks are rolling out policies at an incredible speed. They don't even debating what is the outcome of those policies. What are the implications of what we're doing? Usually something happens on Thursday and Friday, and by Monday it's all fixed. And so are we going to have new policies for private...”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“I usually say to people, look, we had terrific tightening. We had some withdrawal of liquidity. Could you explain to me how high yield spreads, only about 3%, which is the lowest ever? How could you explain to me the double B bet is trading at only 2% spreads? How can you explain to me that despite a very significant rise in US dollar, which both of you have just highlighted, that basis swaps are only 5 bips? They should be more like 50 bips or above. And so to me, the advantage of our era is that first of all, we have too much capital. In other words, the idea of scarcity of capital that underlines things like DCF calculation or underlines most of the investment decision do not apply when you have too much capital. Now, it is not evenly or fairly distributed by any means, but there is plenty of capital. And the way you can measure it is essentially what is the value of all.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, what it basically means is that this idea that you have relatively flattish outlook and you try to manage it on a margin is becoming irrelevant. So for example, Federal Reserve, at the end of last year, on a number of variables, they went past their mandate. In fact, they've overachieved their mandate. And if you look at what subsequent three, four months, suddenly they're way ahead of their mandate. And that's what Philip Law was highlighting, that from now on, you're going to have a great deal of volatility of those numbers. And I think the dots by themselves magnify that volatility rather than creating a greater sort of clarity for market participants.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there are a couple of issues. One of them, those work very well if everything is placid, not a problem. Whenever you have a high degree of volatility, either externally or internally driven, dots really don't tell you anything because it's really a personal opinion of several governors. Some are voting, some are not voting right now. And it's not linked to either federal policy. It's not vetted. It's not researched. There is nothing in it. So so long as the line of sight is relatively stable, dots are absolutely fine. As soon as you get the volatility, they are not. And I sang Philip Lowe, who retired as a governor of Reserve Bank of Australia late last year, put it the best way. He said, central banks will never see again inflation contained in a narrower range.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Basically, show the productivity miracle wasn't really there. So you have quite a faulty numbers, both from Bureau of Labor Statistics on the labor market. You have mostly backward-looking or contemporaneous numbers in terms of inflation. And if you become data dependent, you're starting to create exceptional volatility because you're basically like a deer in a light. You're stuck. You cannot move to the left. You cannot move to the right. Now, what I think Jerome Pell is doing quite well. Is trying to introduce some degree of forward guidance. So essentially, what he's saying and what he said last week is that if I think of the shelter expenses, they're not quite as bad as the numbers look. And he's absolutely right. If he talks about other”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“If he could, he would have got rid of dots today. The problem he has is that the volatility getting rid of dots probably will be greater than the volatility dots themselves are creating. So he's trying to denigrate it by arguing that dots degenerate almost immediately as soon as they are published. So he's trying to take our tension away from dots. But as long as they're published, they are the material. So you've got a data dependency on the one side, which is basically a dependency on a backward looking or at best contemporaneous numbers that you have. You also have a lot of faulty numbers, whether it is how you determine shelter expenses or owner equivalent rent. How do you relate secondhand car prices? How do you measure insurance policy or financial markets? But there's also major problems with bureau labor statistics. I mean, I'm glad that they've increased or revised hours work last week.”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely right, Tracy, that what essentially we have is a Federal Reserve is a prisoner of policies. They start putting in a couple of years ago, which is essentially being extremely data dependent rather than forward-looking. There is another problem, and that's the dots. One of the most destructive instruments from Bernaki era. So it's not anything to do with JPAL. I think if you...”
2024-05-13 · Odd Lots · Viktor Shvets on How the Fed Has Become a Prisoner of Its Own Making · IDENTIFIED FROM THE TRANSCRIPT · source