Jeff Snider: The Global Currency System that Really Matters
Tom welcomes an extremely thought provoking guest Jeff Snider to the show. Jeff flips the lid on the global shadow money system and shows us all the mechanisms and leavers that lie in the shadows.
Inflation is understandably an emotional topic and often a difficult conversation to have. Inflation is always and everywhere a monetary phenomenon. It’s usually a significant increase in prices across a broad swath of the economy. In order to see sustained price increases, you need to have too much money chasing too few goods.
Bank reserves are not money they are a unit of account used in the banking system. Therefore the Fed isn’t flooding the world with money. The balance sheet of the Fed is a reaction to something else happening behind the scenes. Reserves are not the same as printing dollars.
What we have seen in the CPI and PPI figures recently seems exclusive to the United States. We see these humps in these flawed measures which clearly line up with the reopening of the economy. We also see a response from the large drops of helicopter money but these conditions tend to be temporary.
Part of the Fed’s objective is to promote expectation policy. Some of their plans are intentionally designed to register an emotional response. Something is not right with what we are being told. They don’t actually print money, that’s why the dollar and inflation don’t get out of control. Bank reserves are not a trivial distinction. It’s all smoke and mirrors.
If you believe the Fed is printing money then you will act on that information. That is the point. This is called expectation policy.
Jeff points out that the Eurodollar system plays a key role in the global reserve currency system. The Euro is a virtual reserve-less currency standard that is global. As the Bretton Woods system failed the Euro stepped in as its replacement. This happened before the ending of the U.S. gold standard under Nixon.
The 2007 crisis was due to a global Eurodollar system shortage. There was a collapse of this shadow money system that affected the entire global economy. The global reserve currency system has been steadily malfunctioning for the last 15+ years. Money is always 100% about confidence. Since the 1950s we’ve had vast changes to how money was defined. Today, the Fed barely comprehends what money actually is anymore. Central banks are pretending to understand what is going on. The Eurodollar system appeared to work so long as it was expanding. As we saw in 2008 the inherent flaws finally caused a crisis in confidence.
Jeff explains why Evergrande is not a Lehman moment because it’s an intentional event created by China. China is attempting to transition to a more socialist state via a system of managed economic contraction.
Crypto prices today are way out of whack with the rest of the economy and the idea of ledger money is not a new phenomenon. Since a tidal wave of inflation is not coming the shift in the narrative will cause problems for crypto.
Central bankers no longer understand money or what is going on with the system. They only look at various metrics to judge if their policies are working.
Time Stamp References:
0:00 – Introduction
0:40 – Inflation Causes
3:17 – Sustaining Inflation
6:54 – Camel Humps
10:52 – Fed Policy Approach
13:50 – Bank Reserves
16:14 – Reverse Repo
17:40 – Euro Policies
23:53 – What broke in 2007?
27:40 – U.S. TIC Data
32:26 – An Evergrande Moment?
36:55 – China’s Debt & Risk
39:11 – Gold and/or Crypto
43:12 – Where is the risk?
45:30 – Fed & U.S. Gov’t
48:20 – Lies & Statistics
54:52 – Course Corrections?
56:42 – Digital C.B. Currencies
58:46 – Money Vs. Currency
1:01:52 – Concluding Thoughts
1:07:35 – Wrap Up
Talking Points From This Episode
- How bank reserves and how the shadow banking system works.
- Why the Fed’s main job is ‘managing expectations’.
- The 2007/2008 crisis and the real causes.
- The importance and role of the Eurodollar system.
As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College.
After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida, Inc. During the early part of the 2000′s he began to develop the research capability that ACM is known for. As part of the portfolio management team, Jeff was an integral part in growing ACM and building the comprehensive research/management services, and then turning that investment research into outstanding investment performance. As part of that research effort, Jeff authored and published numerous in-depth investment reports that ran contrary to established opinion.
In the nearly year and a half run-up to the panic in 2008, Jeff analyzed and reported on the deteriorating state of the economy and markets. In early 2009, while conventional wisdom focused on near-perpetual gloom, his next series of reports provided insight into the formative ending process of the economic contraction and a comprehensive review of factors that were leading to the market’s resurrection.
In 2012, after the merger between ACM and Alhambra Investment Partners, Jeff came on board Alhambra as Head of Global Investment Research. Currently, Jeff is published nationally at RealClearMarkets, ZeroHedge, Minyanville, and Yahoo!Finance. Jeff holds a FINRA Series 65 Investment Advisor License.