Excellent point “we are suppressing economic cycles, injecting an artificial equilibrium which will only make the system more fragile in the long run…we are not allowed to have a recession anymore”. We have exaggerated and caused bubbles in many areas because of this, exaggerated inequalities, hidden corruption in all the funny money, caused enormous misallocation of capital. You can easily see the components of the market and see the results of this incoherence. It is not always easy to figure out what events will change things, but like Mother Nature and her cycles, you are not really eliminating cycles, just making the inevitable chaos much worse when things swing back to some sort of equilibrium. Corruption might be a place to watch. The tide will go back out eventually causing some big problems. People confuse funny money for skill and get drunk on the power which causes people to do crazy things. Thanks for the voice of reason. 😊
Newton's law:" for every action there's an equal an opposite reaction". Suppressed rates will eventually, like a coil spring, be released to its original natural position. Soon expect a violent economic release!
I think your newsletter is an undervalued gem. This is my first time reading your newsletter. As an investor for nearly a decade, I can see value in how you interpret geopolitics, credit and money supply, election correlations. I also like the raw humility and personable nature of your writing. As a writer in a similar niche, I’d love to connect so we can support one another. I do have a family office myself where we invest in local businesses from time to time so it’s great to be part of your journey to witness the growth of your fund! Look forward to supporting one another✌🏽✌🏽
I agree that Trumps immigration and tariffs policies are inflationary but that hardly means the election of Trump will be inflationary. That is it will take some time to roll back policies, change executive orders, etc. Not sure if that was clear in your piece.
A second point, the yield curve is widely recognized as a poor predictor of recessions today so I don’t know about using it as the primary foundation to predict a recession. Overall I agree the biggest issue facing using today is bouts of inflation, but not stagflation. Inflation in the US does not look like the 1970s, rather it resembles more of a WW2 type recession.
I kindly disagree on the inflationary point. Protecting the US-economy from Chinese goods would only cause a deflationary glut in other parts of the world, which causes falling bond rates outside of the US. The rate differential would strengthen the dollar which is a proxy for high real rates in the US. Exports would suffer a lot, as well as big cap profits and the labor market. The US would fall into deflationary tendencies via a hard recession, which forces lower rates and a competitively weaker dollar. The deflationary pressures out of China cannot be erased by hard protectionism. The repercussions come in via the bond markets, FX-markets and trade. On the other side of the Atlantic the political class in Brussels will be very pleased to have cheap Chinese products wanting to flood in. They could easily grab some windfall taxes by some wisely sized tariffs on that products (analog to i.e. taxes on hydrocarbons). At the same time bond yields have enormous room to fall due to deflationary pressures and huge excess savings in the eurozone. The US cannot escape these deflationary pressures. Most probably because of a strong dollar and weak labor markets.
Excellent point “we are suppressing economic cycles, injecting an artificial equilibrium which will only make the system more fragile in the long run…we are not allowed to have a recession anymore”. We have exaggerated and caused bubbles in many areas because of this, exaggerated inequalities, hidden corruption in all the funny money, caused enormous misallocation of capital. You can easily see the components of the market and see the results of this incoherence. It is not always easy to figure out what events will change things, but like Mother Nature and her cycles, you are not really eliminating cycles, just making the inevitable chaos much worse when things swing back to some sort of equilibrium. Corruption might be a place to watch. The tide will go back out eventually causing some big problems. People confuse funny money for skill and get drunk on the power which causes people to do crazy things. Thanks for the voice of reason. 😊
Ok
Thanks Alf!
Newton's law:" for every action there's an equal an opposite reaction". Suppressed rates will eventually, like a coil spring, be released to its original natural position. Soon expect a violent economic release!
Newton’s law does not include time Horizon to the equation. Might be decades long of play.
I think your newsletter is an undervalued gem. This is my first time reading your newsletter. As an investor for nearly a decade, I can see value in how you interpret geopolitics, credit and money supply, election correlations. I also like the raw humility and personable nature of your writing. As a writer in a similar niche, I’d love to connect so we can support one another. I do have a family office myself where we invest in local businesses from time to time so it’s great to be part of your journey to witness the growth of your fund! Look forward to supporting one another✌🏽✌🏽
I agree that Trumps immigration and tariffs policies are inflationary but that hardly means the election of Trump will be inflationary. That is it will take some time to roll back policies, change executive orders, etc. Not sure if that was clear in your piece.
A second point, the yield curve is widely recognized as a poor predictor of recessions today so I don’t know about using it as the primary foundation to predict a recession. Overall I agree the biggest issue facing using today is bouts of inflation, but not stagflation. Inflation in the US does not look like the 1970s, rather it resembles more of a WW2 type recession.
Soviet economy had no economic cycles. Guess we want to double check the result.
Good stuff!
Sorry if a dumb Q but, where can I see the video or visuals w/ the audio feed? Is it just a scroll through the article as you speak thing?
I kindly disagree on the inflationary point. Protecting the US-economy from Chinese goods would only cause a deflationary glut in other parts of the world, which causes falling bond rates outside of the US. The rate differential would strengthen the dollar which is a proxy for high real rates in the US. Exports would suffer a lot, as well as big cap profits and the labor market. The US would fall into deflationary tendencies via a hard recession, which forces lower rates and a competitively weaker dollar. The deflationary pressures out of China cannot be erased by hard protectionism. The repercussions come in via the bond markets, FX-markets and trade. On the other side of the Atlantic the political class in Brussels will be very pleased to have cheap Chinese products wanting to flood in. They could easily grab some windfall taxes by some wisely sized tariffs on that products (analog to i.e. taxes on hydrocarbons). At the same time bond yields have enormous room to fall due to deflationary pressures and huge excess savings in the eurozone. The US cannot escape these deflationary pressures. Most probably because of a strong dollar and weak labor markets.