The Real Inflation Rate
The Federal Reserve's total assets expanded from $480B in 1998 to $8.6T in 2026- an annualized rate of 9.40%
When I first started out trading U.S. Treasuries, I was taught to always concentrate on the Federal Reserve (FRB or Fed), their policies, their outlooks, their mandates and especially pay particular attention to their meetings and their decisions. So many investors focus on equities and the stock market, but for me, it was always bonds and the Fed.
As a bond arb, we had to navigate U.S. yield curves, in particular place bets on the shape of this curve up and down the maturity spectrum. Most of the time I was playing bond futures vs 30Y cash, ten year futures vs 10Y cash, but some of the time it was duration spreads, 5Y vs 10Y, 10Y vs 30Y and my favorite the FOB or 5Y vs 30Y.
At my peak I was trading about $500m worth a day, looking back, I wish I forced Cantor Fitzgerald and BrokerTec to pay for more than just an occasional dinner and night out, with the commissions I was paying them, it should have been quarterly trips to Costa Rica or Las Vegas!
Anyway those were the good ole’ days, where the exchanges even on the electronic trading level, not even the trading floor, I knew who I was trading with in real time. JPMorgan was 660, Goldman was 350 and quite often If I were buying and selling into these two houses, well, I would rethink my entire sentiment, because they obviously had more bullets than I did!
Anyway point being, as a bond arb, the Fed was the data point to consistently follow.
As time went on the Federal Reserve morphed into what has essentially become the U.S. Treasuries bad bank or conduit to fund deficit spending and off load certain failed public endeavors and disperse these failed private bets to the public over time.
Now this data chart I present is very transparent, when it comes to inflation, Magnelibra has only measured it in one way, that is the annualized increase in the Federal Reserves balance sheet. This is the base money layer by which everything else is extrapolated and levered upon.
Nobody and we mean nobody looks at this the way we do, we present this to our readers because this is novelty, something that differentiates how we view the markets and what drives them from the way everyone else looks at them.
Ponder this chart this weekend and question, who benefits from this massive inflation, who gets hurt and how sustainable is a policy like this for civil society not only domestically here in the U.S. but for the global stage at large?
With a real 9.4% annualized inflation rate, incomes for the general public have no choice but to take on even more labor and debt. Its becoming obvious that this is the intent and has been the intent for quite some time.
Till next time, thank you to all those who continue to subscribe, at the minimum, please share our work so we can educate even more people and think about supporting our work that we do.
Have a great weekend!
-Team Magnelibra
