Palisades Gold Radio: Bonds are Calling out the Fed (w/ Jeff Snider)

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Palisades Gold Radio
Feb 23, 2022

Jeff explains the purpose of swap spreads which includes reflecting systemic credit risk. Back in October 2008 something significant changed as spreads turned negative.

The 2008 crisis was primarily about the money dealers since without them there is no banking system. We may not want a fixed supply of money because the world is quite dynamic. We need to adapt the Eurodollar into a more disciplined system.

Every country constantly needs dollars because otherwise, they can’t participate in the global marketplace. When countries need dollars in a hurry it’s not unusual for them to sell treasuries.

The Fed is concerned that the public might begin to change their spending behavior because of inflation. The Fed today is more of a behavior influencer than a direct intervener in the markets. The main parallels of today are the 1930s in the U.S. and the 1990s in Japan.

 We see similar pricing of current long-term bond yields to those times.

Gold prices this year are doing fairly well despite higher interest rates. Gold is often a reflection of long-term treasuries. The bottom line for gold is that nothing in the system has been fixed so gold will continue to do well. There are many ominous signs of problems in the system.

Compressed rates, flat yield curves, and negative rates are all indicative of massive problems in the monetary system. What form those problems will take remains unknown but they are stacking to the downside. It could be a recession or a decline in growth for part of the world.

https://www.youtube.com/watch?v=fnm9KMjRPdI

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