Two things Fabian, first, the difference between conspiracy and reality is about 6 months these days. at leas that has been the case since Covid.

second, I disagree that we are entering a much slower economic phase. I fear that the 40% increase in money supply that accompanied the Covid stimulus is not nearly worn down and there is still ample liquidity around. add to that the near certainty that Yellen will play with the TGA to support markets and the economy as much as possible heading into the election, and I feel there is little evidence that inflation rates are going to head back anywhere close to 2%, rather 3.5% CPI seems like a base to me. but then, that's what makes markets! hope your weekend was good

Expand full comment

I agree with the first, Andy.

On the second: the increase in the money supply was about 25% (if one looks at M2, M3) year-over-year. I have also thought a lot about the trajectory of CPI, and changed my conclusion in late automn. Before, I had agreed with you, but the rise in the stock market let me assume that the rise in velocity lately resulted from high inflation and that the money has already reached those who do not use it to buy real economic goods but invest it into financial markets. In the end, changes in the money supply is a good proxy to assess where inflation is headed.

Yellen might well do try to spend the TGA to support the economy. However, the assumption that this will sustainably support the economy is too much of a "3D-Chess" assumption that I cannot really grasp.

However, interesting times ahead, I'd say - hope your weekend was good too!

Expand full comment