Lyn Alden on financial repression and yield curve control

In this video Paul Buitink talks to Lyn Alden of http://www.lynalden.com.

Follow Lyn on Twitter at lynaldencontact
Follow Paul on Twitter at paulbuitink

Sorry, no video this time, it got corrupted when my computer crashed.
Greetings, Paul

They first talk about the turbulence onthe repo market, how there was a shortage of t-bills.

Then they talk about yield curve control (YCC), what it is and how it was last used in the US in the forties. At the moment Japan and Australia are doing it. When you choose YCC you try to peg the yield of your bonds at a certain level. You will lose control over your balance sheet and the value of your currency. If you’re the only central bank doing it you will weaken your currency. Central banks don’t coordinate too well.

Lyn doesn’t expect the Fed yet to announce YCC in March but first try things like operation Twist. YCC is a last resort measure for a central bank.
YCC is done to keep government funding costs low. You can also achieve that by changing the maturity structure of the treasuries. In Europe there is yield spread control to suppress yields of the weaker Southern nations.
Yields of those countries don’t make sense from a private sector point of view. The ECB also buys lots of bonds in other to keep the value of the currency relatively low. Without fiscal policy it's difficult to invoke inflation though.

They talk about the sustainability of the US debt being over 100% of GDP whereas Reinhard/Rogoff say above 90% and you’re in trouble.

Financial repression is going to happen.

Over the past years there was mostly domestic buying of US treasuries. The reserve status of the US dollar is waning. Multi-currency energy contracts, but it’s a long process.

In the forties you had more patriotism and slower data, so people accepted financial repression more. Financial repression is harder these days.

Hyperinflation is not Lyn’s base case for the next 5 years. She sees that as a tail risk.

Central banks are counting on the pandemic to end soon, reduce the stimulus bills and have 5-10% inflation over the next couple of years inflating away the debt. In that base case gold is expected to do well over the next 5 years depending on real rates. Bitcoin is a different asset class as it goes through its adoption phase. It will be the fastest horse.

Generational differences between gold and bitcoin exist. Lyn likes diversification though, having a basket. She doesn’t buy the narrative that gold is being demonetized.

Great reset could be a tail risk event. Gold revaluation could be a nuclear option to do for the Treasury and Fed.

She emphasizes diversification above anything! And likes exercising as a hobby :)

Видео Lyn Alden on financial repression and yield curve control канала Reinvent Money