I caught up once again with Steve Van Metre to discuss the latest macro outlook.
Steven Van Metre, Certified Financial Planner™ Professional, (CA Insurance License #0D45202 & Investment Advisory Representative with Atlas Financial Advisors, Inc., a Registered Investment Advisory firm.) is a financial planner, portfolio manager, and President of Steven Van Metre Financial. He specializes in retirement income strategies and the direct management of client assets.
https://www.youtube.com/channel/UCRIQM-CUkxVazVPv980YZsw/videos
Go to the Walk The World Universe at https://walktheworld.com.au/
– Steve van Metre thinks he understands the financial system. But he also “doesn’t get it” when it comes to “(Excess) Reserves” and the bond market(s).
– Companies & the (US) government borrow EXISTING money by issueing bonds. So, in that regard, the government must compete with other companies. So, when investors prefer corporate bonds over T-bonds then interest rates will move higher.
– QE is – most definitely – inflationary. Here’s how it works: The central banks (RBA, RBNZ, FED, etc.) DO “create money out of thin air” (= inflation). Then e.g. the FED buys assets from the banks (= a swap).
– With that newly created money the central banks also buy “assets” out of the market. E.g. the Bank of Japan bought A LOT OF stocks, bonds & ETFs (out of the market). This is NOT a swap. This is what even Van Metre fails to understand.
– Steve Keen has said that those “Excess Reserves” are not lent out. And banks don’t need to lend this money. Because the banks can create all the moeny they need “out of thin air”. Correct but the reality is more complicated. Even those “Excess Reserves” can/will get out into the financial system. Let’s assume that one Mr. Martin North has an account at bank A and that he pays his power bill (say $ 300) to the electricity company that banks at bank B. Then bank A takes $ 300 from its reserves and tranfers those $ 300 to bank B. This is how those reserves get into the financial system.