In 1990, the upheaval in the world was already in full swing. The End of World War II divided the world into two camps after World War II (west and east), the fall of the iron curtain in 1989 was to herald a turning point. The USSR was on the edge of collapsing and marked the failure of another try to implement socialism.
Great piece Fabian (just getting around to reading it now). I am with you on the Fed's ultimate ability to tighten as my take is the economy is starting to slow more rapidly than the Fed is letting on. in addition, we are seeing Chinese growth start to slow dramatically which is going to feed an overall global slowdown. didn't the IMF just cut their forecasts for the year? however, another issue for the Fed is going to be the ability of the Treasury to afford its debt as it has to roll over existing debt as well as add new debt to the pile given the budget deficits. over the past years the maturity of US debt has continued to shrink meaning it needs to roll over more frequently. if the Fed truly does allow the balance sheet to shrink, who is going to buy that debt? I think we could well see a much steeper yield curve as the Fed addresses slowing growth (as much as the Biden Administration hates inflation, they will hate a recession even more) but the lack of a price insensitive buyer of debt will see the back end yields rise. also, I would take the real rate story with a grain of salt as the Fed has massively distorted the TIPs market by purchasing so many as part of QE. Is that a viable "market" measure, or just another manipulated number. in the end, I think they hike probably another 100 in total before the wheels fall off and they stop both hiking and QT
Hi Fabian, interesting stuff to think about. Want to clarify - last para: If that were the case, (financial ? ) asset prices would take a hard hit ....and why CPI in such case is going to rise ten?
Great piece Fabian (just getting around to reading it now). I am with you on the Fed's ultimate ability to tighten as my take is the economy is starting to slow more rapidly than the Fed is letting on. in addition, we are seeing Chinese growth start to slow dramatically which is going to feed an overall global slowdown. didn't the IMF just cut their forecasts for the year? however, another issue for the Fed is going to be the ability of the Treasury to afford its debt as it has to roll over existing debt as well as add new debt to the pile given the budget deficits. over the past years the maturity of US debt has continued to shrink meaning it needs to roll over more frequently. if the Fed truly does allow the balance sheet to shrink, who is going to buy that debt? I think we could well see a much steeper yield curve as the Fed addresses slowing growth (as much as the Biden Administration hates inflation, they will hate a recession even more) but the lack of a price insensitive buyer of debt will see the back end yields rise. also, I would take the real rate story with a grain of salt as the Fed has massively distorted the TIPs market by purchasing so many as part of QE. Is that a viable "market" measure, or just another manipulated number. in the end, I think they hike probably another 100 in total before the wheels fall off and they stop both hiking and QT
Hi Fabian, interesting stuff to think about. Want to clarify - last para: If that were the case, (financial ? ) asset prices would take a hard hit ....and why CPI in such case is going to rise ten?