2023 was good for savers and investors; inflation pressures easing quickly, US debt pressure belie critics doom scenarios; UST 10yr 3.88%; gold and oil lower; NZ$1 = 63.4 USc; TWI-5 = 71.1

https://www.abc.net.au/news/2023-12-30/will-consumers-have-to-pay-to-ac…

A commentary on Australia's progress towards cashless society. Probably similar trend to NZ.

just another way for the government to have control over you.you will all regret in time                                                              

Financial conditions are actually the tightest in a while. It is a fallacy, perpetuated actively by Bloomberg for decades, to measure the tightness of looseness of financial conditions by interest rates. It's only true in equilibrium - a theoretical & fictional state never seen   Link

But critics always push that as real debt.

If it isn't treated like real debt - in that it doesn't get repaid by the doing of something real - then will people still believe in money, David? That's the whole point. Money is bullshit - tokens keystroked into existence. You can stave off the day they need to be cashed-in for something real - passing the parcel, inflating the numbers you put against a house or whatever - but sooner or later then get cashed in.

There has never been more proxy - more forward debt-betting - than now. There has never been less physical planet to bet on, than now. 

And GDP is an inadequate measure, btw. Measures selected flows, but not stocks. Which leads to people making comments about cheaper batteries....

Thanks for the interesting perspective on the U.S. govt. debt scenario.  As a US taxpayer, it worries me, but we rarely hear the comments you make here.

First, remember annual US GDP is still larger than the cumulative buildup of debt

Past time to eliminate overhead costs of rent extraction from national GDP accounting.

Whereas formal economic models explicitly state their assumptions (whether realistic or not), national accounting frameworks feature various implicit boundaries, which are not shown along with the data but are rather buried in technical notes on ‘methodology’. For example, the interest- based financial services mentioned above were originally considered mere transfers and thus outside the production boundary before 1968 (Christophers 2011). The 1968 System of National Accounts (1968 SNA) moved the production boundary by representing these services as inputs to an imaginary sector (thus making the assumption that they were ‘implicitly’ productive), whereas the 1993 SNA moved it further by considering such services to be the final consumption of households (and thus explicitly productive). The 2008 SNA went even further by stipulating that even the lending of banks’ own funds was a productive activity (dropping the pretense of ‘intermediation’ between savers and borrowers originally used to portray banking as a productive activity). In each of these cases the assumption of the level of productiveness of interest-based financial services was not explicit in the data, but rather implicit in the location of the boundary. Similarly, R&D expenditures by firms, governments and non-profit organizations were previously assumed to be intermediate inputs (or costs) of these entities, and thus deducted from GDP, but have been reclassified by SNA 2008 as investments in fixed assets, and are thus now counted in GDP. This adjustment added around $560 billion to US GDP in 2013 (when the country adopted SNA 2008) - more than Sweden’s entire output that year - and conveniently reinforced “America’s status as the world’s largest economy and [opened] up a bit more breathing space over fast-closing China” (EIU 2013). Different boundaries in the national accounts are thus based on different assumptions and lead to different results, but less explicitly than formal economic models. This contrast with explicit models is thus the second reason why MMT had not yet affected national accounting. Most economists do not even learn the details of national accounting in their professional training, and the measurement (or rather construction) of macroeconomic aggregates such as GDP is outsourced to official statisticians. It is simply not considered part of the conversation, neither in mainstream nor in heterodox circles. Link/GDP overhead

...US households have an enormous positive net worth - one that grew to US$151 tln in the last 12 months, +US$8 tln. That alone dwarfs the US$2.3 tln rise in the Federal debt over the same period.

Market capitalization isn’t “wealth.” It’s the latest price, times shares outstanding. Blotches of ink on paper. Flashing pixels on a screen. If a dentist in Poughkeepsie buys a single share of Apple at a price that’s 10 cents higher than the previous trade, $1.6 billion in market capitalization emerges from thin air. If a single share trades 10 cents lower, $1.6 billion evaporates just as quickly. Whatever happens, every security in existence has to be held by someone until it is retired. Ultimately, the wealth inherent in a security is the future stream of cash flows it will deliver to its holder(s) over time. Price fluctuations don’t change those underlying cash flows. They just provide opportunities for the transfer of savings between investors. High valuations favor the sellers. Low valuations favor the buyers. Investors have never paid higher prices for those future cash flows, or accepted prospective returns so low.

Put simply, the bubble hasn’t changed the wealth, and a collapse won’t change the wealth. What will change is the market cap. I suspect that the erasure of market cap in the coming years, and possibly the coming quarters, may be brutal. Still, no forecasts are required, and our own attention will remain on observable valuations, market internals, and other factors. Meanwhile, even if an investor sells at these extremes, the only thing that will change is who holds the bag. Link Hussman

The UST 10yr yield is +3 bps higher today, now at 3.88%

Treasuries Tumble After $1 Trillion Reverse Repo Drains $190BN In Liquidity, Index Change

..sodium-ion batteries...

Can someone lend me their notes, I wasn't paying attention. What are the relative benefits, drawbacks and cost compared to lithium based chemistry?

Best preforming asset award for 2023 goes to ...drum roll (Carlos please read out the winner). Well done to those here who filled up their wallets over the year.

NZ 2yr mortgage rate started at 6.58%, and has ended at 7.04%, a net change of less than +0.5%

This will come as quite a surprise to some commenters on Interest !

And the best performing main asset is…:

Bitcoin started at US$16,527, finished at US$41,812 for a net change of +153%

Wether we like it or not (and I'm no Bitcoin fan)

Jamie Dimon has called Bitcoin a "hyped up fraud" and "worse than tulips", etc, He also fronted to the Senate recently with Pocahontas Warren to say "“I’ve always been deeply opposed to crypto, bitcoin, etc., The only true use case for it is criminals, drug traffickers … money laundering, tax avoidance."

Yesterday, JP Morgan announced it is going to be the Authorized Participant for the biggest bitcoin ETF soon to be approved by and run by the Fed's shadow money manager (Blackrock). That means JP Morgan will be buying directly (and with privilege over the little guy) from Blackrock.

What a world we live in.   

On the Friday before the New Year, prosecutors have dropped the 2nd case against Sam Bankman Fried.

This court case would that would have disclosed the mainly Democrat beneficiaries who received his campaign contributions. It is an election year. During the fraud trial Caroline Ellison testified that SBF gave the Biden Administration USD10 mio and the reason he told her was to “buy access.” He got two personal meeting with Gensler at the SEC; the CFTC; Maxine Waters and others on the Senate Banking Committee. 

The ruling elite taking care of its own. 

https://nypost.com/2023/12/29/business/sbf-wont-face-a-second-trial-aft…

Thankyou for the annual change summaries. Snapshots but interesting ones nevertheless.

The NZ sharemarket really is struggling isn't it. Even the power companies who have loaded up on debt.

The US federal 'debt weakness' isn't mirrored in the rest of their society, not matter what the partisans say

Once more for those at the back... If the US Govt runs a deficit then non-govt (households / businesses etc) have to run a surplus. It's basic accounting - the Govt is pumping more new money into the economy than it is collecting in taxes. An increase in Govt debt means an increase in private assets.

This is why the NZ fetish for Govt budget surpluses is so dumb - we have a current account (trade) deficit, so NZ Govt can only run budget surpluses if increases in private sector debt are more than the sum total of the Govt surplus and the trade deficit. This happened between 2005 and 2008 and again 2017 to 2019 when our housing bubble was inflating, but I can absolutely guarantee you that the new Govt will not hit their budget surplus target in 2026/27.. unless they are going to properly go for private financing for infrastructure (which basically involves moving the debt off their books and out the calculation for net debt).