Apr 6, 2023Liked by Peter Nayland Kust

My guess is that the employees of the Bureau of Economic Analysis are lazy weasels.

2022 is the year that we started to ‘come out of’ the pandemic shutdown. Whole downtowns began to revive, people shut in their homes warily began to venture out to do things again. Because of the historic uniqueness of the multi-year shutdown, a huge percentage of the statistics gathered and generated by these government employees would need to be ‘corrected’ for historic abnormalities. But how, exactly? An excellent mind such as yours, Mr. Kust, would have figured out fairly accurate statistical corrections, but the bureaucrats- faced with a task they’ve never encountered- probably could not agree on the particulars of how and what to correct, so they didn’t, at least not in meaningful ways. An employee of a government bureaucracy is not likely to rock the boat by proposing daring new corrections. The result is that their statistics are probably off even more than usual.

Coming out of a huge economic shutdown, there should have been such pent-up demand that we would have had robust growth. We didn’t, and your analysis shows that growth was even weaker than officially indicated. I agree, we’re in a recession, not two-plus percentage annual growth. Thank you again, Mr. Kust, for giving us meaningful analysis!

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Mr. Kust - thank you for another substantive work of original thought. Yours is a daily must read - have you thought out the fate of the dollar as the reserve currency to the world and whether it is net net good for us regular USA cutizens? The "hype media" seems to claim sky is falling is that true?

Know this is a complicated topic but I'm guessing you have serious thoughts on it already?

Thanks in advance.


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Will the dollar eventually be replaced as the world's premier reserve currency?

Absolutely. And just as soon as a better alternative comes along.

I don't see the yuan/remninbi as that better alternative. For all the talk of the BRICS countries uniting to create a new reserve currency, BRICS has less geopolitical substance than the EU, and it took the EU member states the better part of a decade to put the Maastricht Treaty together that summoned the euro into being.

People forget that currency strength is relative to other currencies, not to history. It doesn't matter that the dollar today is weaker than the dollar of 50 years ago. It matters that the dollar today is stronger (more or less) than the yuan, the yen, the euro, or the pound sterling.

Over the past year, of those four currencies, the dollar is only marginally weaker against the euro.

Over the past two, five, and ten years, the dollar is stronger than all of them.

Much is being made of China pushing the use of the yuan to settle its oil purchases from Saudi Arabia, or France buying LNG and paying yuan. Yet this overlooks that the genesis of the "petrodollar" narrative was Nixon's negotiation with the Saudis to reinvest their money in US treasuries shortly after the gold window was closed.

The Saudis might agree to take yuan today from China, but what will they do with those yuan? What yuan-denominated assets can they purchase? Can they get better returns from dollar-denominated assets? Are they turning to China strategically or are they simply providing China a service by taking on the currency risk in order to sell China more oil (for obvious reasons, China has been focusing most of its purchases lately on Russian oil)?

There is a truism in economics that "bad money" chases out "good money"--the theory being that people hold money that is the better store of value and spend the money that is the worse store of value. Is China, by pushing to see the yuan used in more international settlements, positioning the yuan as "good money" or as "bad money"?

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thank you for the insight -- it seems from your reply an entire book could be written on this topic -- I've been meaning to ask you, the money being removed from the banks, due either to the low returns they are providing or the risks of collapse/bank runs, where are depositors now putting it, into money market accounts at the investment firms? But that only satisfies the returns issue, it doesn't eliminate the run/failure risk -- is that just the risk accepted in having to put that kind of deposit somewhere, short of just actually taking cash dollars out and holding onto them (or buying hard, actual assets, such as RE, cars)?

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SEVERAL books could be written on the topic. (If I get enough paying subscribers on this substack I would have quite a lot of fun writing at least a few of them! :D )

A fair amount of the money being pulled is being placed in money market funds with investment firms and brokerages--better interest rates but no FDIC protection

When you're talking tens of millions and even billions of dollars, simply pulling the currency out and stuffing it in a mattress is unworkable even without inflation.

Cars are actually a pretty bad store of value. Until a car becomes a classic--IF it becomes a classic--it loses value every year, guaranteed. Real Estate can still offer a good value proposition,, but mortgage rates make the buying proposition extremely dicey.

Which is the big challenge now that the "everything" bubble has burst. Until asset prices find a new equilibrium, it's going to be a bumpy ride!

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Has the everything bubble really burst? Stock market indices are a bit off their late 2021 all-time highs, but still in the stratosphere. Real estate is also down a bit, but not much, and there isn't much inventory. Gold is at $2000, silver at $25, copper at $4.00, and oil over $80. The bubble might have a small leak, but I don't see it as having "burst" yet.

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