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GrantsInterestRateObserverFall2013ConferenceOctober22,2013
Thekeytounderstandingmacroeconomicsisunderstandingcentralbankreactionfunctions
Importanttorecognizeproportions
o Thingsthatsimplydidnomatterwhenthereissomuchmoneyprintinggoingon
Cyprus,Chineseshadowbankingcrisis,Eurozoneproblems
Whatdidmatter?FOMC
Theentirepointofprintingmoneyistoavoidicebergs
Crappyloanissuanceisatanalltimehigh
Blocktradesondebtarebecomingmoredifficulttoexecute(liquidityfalling)
o Marketswillbemoreliquidityconstrainedgoingforward
o Thebuysidesabilitytoprovideliquiditytothesellsidewillbecomemore
constrained
Yellenisnotamarketperson
o Isusingthestorythatconditionshaventimproved
o EvenFOMCdovesarequestioningtheefficacyofassetpurchases
o Enamoredw/theideathatcommunicationisasimportantasaction
Bernankebelieveshecankeepthebondmarketonastring
BecarefulenteringcheapforeignmarketslikeTurkey
Thecurrentlullisthetimetohedgeandunwindpositions