Sovereign debt and Citi Golfs — the night our economic engine broke down

There’s a mutual friend in our crypto WhatsApp group who was always the youngest in the crew, but now has become a true finance bro. He calls governments printing money “injecting liquidity into the system” like it’s the case of lang biere we used to put money together for and drink before the bottle of rum on the way to the club.

That would be like taking a loan out to finance an immediate asset acquisition – hitting the club with just the right amount of dutch courage to facilitate interactions with attractive possible mates.

The key to this strategy is to not peak too early and adhere to a strict austerity budget when inside the club while staying hydrated enough to both a) keep the good vibes going and b) still have enough cash reserves to afford a post night-on-the-town meal – my friends have a penchant for a full-house masala steak gatsby, but I have always been morally and constitutionally opposed to egg on sandwiches and frequently had to fund additional food purchases.

And you also never knew when a night was going to end, especially if the crew was successful in its mission and the car acquired more passengers who then would need to be carted home. A Citi Golf uses a lot more fuel when laden with seven to eight adults and the first stop is up Kloof Road (we lived in the true north – beyond Bellville).

When the US treasury decided to start interfering in the Japanese yen crisis, it was a bit like your brokest homie being overly successful in the night’s mission, but it’s also the weekend before payday and the party is now moving to Maiden’s Cove.

Taking a Citi Golf to GTI, Jeep and Audi land is always a risk, but at end-of-the-month Salticrax it can be the ruin of lives and friendships.

To keep the party at Maiden’s Cove from ending in tears, the US Treasury and the Federal Reserve couldn’t let Japan dump their massive stash of US Treasury bonds to buy Yen on the open market, because that would spike US borrowing costs and crash the bond market.

So they set up this neat little backdoor called the Foreign and International Monetary Authorities Repo Facility. It’s basically like calling up that dangerous acquaintance who always has the latest Jordans (curiously at the same rate of the rich kid on the block misplacing his…) and inviting him out to help cover some of the costs.

My homeboy would call this shadow liquidity. The balance sheet expands, you buy more liquor – and of the lady-friendly variety (read: more expensive).

But bailing out the crew and showing the Camps Bay cuties a fun time is only half the hustle. That shady friend is running a tab in his mind and the payment will come due with interest.

Now he is part of the crew and is calling you up every day to find out where the party is at. So you hit the local bar mid-week to buy him a round or two and try to whittle down some of the debt.

You may call it “soft yield curve control” – the Camps Bay cuties were quite charmed by the whole crew (shady bud included – they always seem to like the badboy) and he hasn’t said anything about owing him one … yet.

Now he is in the car on the way to the smokkie and says he will choose the bottle alongside the case. And this bruh has expensive taste for someone who doesn’t get out often. Suddenly that rum is cognac – and he says it’s for the afterparty. This means paying full rate at the bar to keep the good vibes going.

You meet the Camps Bay cuties at the club and they also want drinks, and they have another two friends to match your crew’s number. And you’ve realised that they’re not actually that cute and you’ve run out of things to talk about because you’re not that interesting without the liquidity.

The drive to Maiden’s Cove is much less of an adventure because it’s hard to have a good time in the boot of a Citi Golf when you haven’t reached full party mode.

The cognac then becomes the life of the party in Maiden’s Cove and all you had was one shot. Shady homie goes to the next party with the cuties in the back of a shiny GTI and you and your real homies don’t have enough petrol to get home.

Your money supply expanded way faster than economic output and the cuties read the market and flocked to safe-haven assets – with a dangerous edge (read: they bought bitcoin instead of dollars).

Your social currency has been debased and it’s end-of-the-month Salticrax from the first weekend of December and you can’t even think of a gatsby because that won’t help get you home.

In short, the next time your WhatsApp group’s resident finance bro talks about injecting liquidity, just remember: the government is just buying time on a sovereign credit card, spending too much money in the club, and hoping we don’t notice until the Citi Golf won’t start the next morning.

I did keep in contact with one of the Camps Bay girls. Well, she actually hit me up a week or two later, saying that she was missing a few items at home after we came over that weekend her parents were away. I told her that we never made it to that stage of the party, but the shady homie did... DM

Stephen Grootes is off somewhere fancy and restful this week, but will be back next Monday with his usual brand of sophisticated insights and anecdotes.