15 Comments
Sep 29, 2023Liked by Peter Farac

Man this is amazing. Who are you? Have you written a book?

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author

This is a book coming together!

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Sep 30, 2023Liked by Peter Farac

When can I expect it. I would love to buy it as soon as it is out.

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Oct 4, 2023Liked by Peter Farac

This is the best write up of sectoral analysis that I have ever seen. VERY educational for me.

Do you plan on doing a similar write up of China? I’d like to see a collaboration with Michael Pettis.

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author

Make sure you read his book "the volatility machine". Everything you need to understand about the intersection between economics and markets.

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Sorry for seeing this so late! M Pettis is the best out there...I can't say that I add much to his amazing work but a collaboration would be incredible. Thankyou for the compliment!

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Oct 2, 2023Liked by Peter Farac

Hi, great article as always! Very much appreciate your writings. Can I ask you why you multiply the 'All debt to GDP' graph with 40,000 and not just 4,000?

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author

Tahnkyou! Different units for the numerator and denominator...

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Oct 2, 2023·edited Oct 2, 2023

Thank you very much! I have another question if you don't mind. Why is it that you say Spain needs a currency devaluation? "Private sector debt is now below the early 2000s as a percentage of GDP and shows little sign of stopping its de-leveraging momentum, making Spain look like a country desperate for a currency devaluation." Could you elaborate on this please, I didn't understand it. Kind regards,

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Continued deleveraging implies that production keeps on shrinking in a relative sense...normally in this situation a free-floating currency would nomrally devalue to try to source demand externally.

Spain is already running a current account surplus so that may not even be able to help...

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Thank you again, I appreciate you taking the time to answer the comments. Have a nice day :)

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You know it's a great piece when an economics subject concludes on people's behavioural patterns. You and Michael Pettis are my best follows on twitter, thanks so much.

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All you need to know to understand that we are inexorably headed to towards either a inflationary default or a hard default is that the idea that the size and expense of government should be reduced is completely unfathomable to anyone at the federal level except to a few fringe types like Rand Paul.

The idea that maybe the federal reserve doesn't need 20,000 employees, or that there is a huge amount of waste and bloat in the military such that the budget could be reduced massively without a decrease in combat capability, or that it doesn't make sense that the capital police has 2,000 officers to protect the capital and ~550 members of congress, is simply not even thought of.

Because government spending in a fiat regime is entirely divorced from anything of value or any sense of fiscal responsibility, they will simply keep spending and borrowing and increasing the burden until something breaks.

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It all comes from the desire to continue a certain way of life past the point where it can be afforded...this is tough for anyone to accept when an easy tool (raising debt) is so easily accessible.

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I’m not sure that’s the case. It may come partly from a desire to hit a gdp growth target that doesn’t match with economic reality. It may come from an investment portfolio that doesn’t match with economic reality. It may simply be a product of uncertainty about exactly what is economic reality. Most likely there is an unknowable change in economic reality underway.

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