Markets are being whipsawed by rate hike threats from Central Banks, China lockdowns, the Ukraine war, while being stalked by inflation and stagflation. The big risk remains policy mistakes – trying to solve these with the wrong monetary and fiscal policies.
Money supply economists argue inflation is nailed on, even if Central Banks and Governments taper QE and hold back further fiscal spending binges. But the consequences of the last 12 years of monetary experimentation, the massive inflation in financial asset prices, the changed investment environment, and rising inequality mean the coming crisis really will be different this time. Maybe it’s not inflation we should fear, but its much more evil and thuggish sibling – Stagflation.
The successful mass pushback on the European Super League may seem a minor issue contained in the sports arena, but it highlights growing voter dissatisfaction with politics, wealth inequality, questions who will pay for funding recovery, and just how much longer the speculative bubbles can continue as the world changes.
How long can markets party on like there is no tomorrow? The thing is – there always is and the hangover is bound to hurt, which is an apt metaphor as English pubs reopen today ! Markets need to prepare for the inevitable consequences of the big transition from 12 mixed years of fairly useless monetary experimentation to a future of fiscal pump-prime policies. What will it all mean for speculative bubbles, inflation and investment preservation?