From Charles Hugh Smith:

The Geopolitics of Inflation

Cutting to Smith’s conclusion:

“Many people expect the dollar to weaken and the Federal Reserve to lower interest rates back to zero once the recession becomes undeniable.

“I am not so sure. A case can be made that interest rates have completed a 40-year cycle of decline and are now in a secular cycle higher.

“A case can also be made that the weak-dollar policy has ended and the dollar will move higher, accelerating the financial and geopolitical consequences described above.

“A strong currency exports inflation to those nations which do not issue the currency. Luck, coincidence or “nudge”?

“Maybe it doesn’t matter. Maybe what matters is that it’s happening.”

SOMETHING TO THINK ABOUT AS IT’S A VIEW THAT’S GAINING TRACTION.

But read the whole piece as it FORMS A MOSAIC.

GoldFix’s take on the latest post by Credit Suisse analyst, Zoltan Pozsar.

“The most important very long term take-away from what Zoltan says . . . is that . . . high rates are here to stay.”

Pozsar:

“If the East holds the key to the supply side, and economic war means that the supply side is held back, the West will have to develop its own supply of things such that “L” becomes “L/”. And much like the current hiking cycle is not a cycle but a tightening campaign, that recovery won’t be a recovery driven by rate cuts but by fiscally funded industrial policy . . .”

GoldFix:

“Pozsar is consistent with previous writings here in that he sees the mercantilist situation currently unfolding. He sees the eventual necessity for a Bretton Woods 3 type of monetary agreement to help heal East/West trade. He foresaw the split in good physical collateral and the supply chain collapse as instigating a rebalancing of the spot world versus the financial world. He also sees the necessity for long term rates to go up while asset prices decrease.”

HOW’S THAT FOR CLEAR THINKING?  I’D CALL IT SUPERIOR PATTERN RECOGNITION.

Still, GoldFix and ZH are skeptical of Pozsar’s thesis as they don’t believe the FED or ANY POLITICIAN ANYWHERE has the SPINE to risk an ECONOMY-CRATERING DEPRESSION as a means of TAMING INFLATION.

I disagree.  While a depression can DRAMATICALLY REDUCE LIVING STANDARDS, INFLATION DESTROYS ECONOMIES OUTRIGHT.

Here’s the full piece.  Decide for yourself.

War and Interest Rates

OR — to what extent are some “HOMEOWNERS” more akin to “RENTERS” than others.

And, of course, ALL MORTGAGORS wind up paying, due to interest charges, MORE — and in some cases, FAR MORE — than a property’s original “SALE PRICE.”

Only those NOT PAYING MORTGAGES are OWNERS IN THE STRICTEST SENSE.

Old Testament vs. New Testament.

WHO ASKED ME, RIGHT?

Well, now you know, ANYWAY.  Assuming you can read fine print.

Pricey process, CORRECT?

Logically, the US and Japan head the list.

Check it out:

The more the sunbelt fills up with TRANSPLANTS, the faster its COST OF LIVING will RISE.

Supply and demand UBER ALLES.

From OilPrice.com

“UBS has reduced its outlook for the British pound to $1.15 in the fourth quarter of 2022, down from a previous estimate of $1.26 per pound sterling.

“If UBS’s target turns out right about its $1.15 call, the GBP will have slumped to the levels seen in the early days of the pandemic and the second-lowest level ever, after the low from 1985, according to Bloomberg’s estimates.”

All well and good, lads.

But tell me something I DON’T know.

From ZH:

“Above-average temperatures throughout Germany are pushing power prices to new records as utilities reduce electricity output in western Europe amid the worst energy crisis in decades. 

“National forecaster Deutscher Wetterdienst predicted a heatwave would persist through mid-August.”

AS LITTLE AS THREE YEARS AGO, NO ONE TOOK ENERGY ISSUES SERIOUSLY.

BUT THEN — SURPRISE, SURPRISE!— WE’RE A RACE COMMITTED TO FOLLY.

You need them all.

From Charles Hugh Smith:

“Capital and talent invested in unproductive bridges to nowhere and speculative bubbles generate a brief explosion of illusory wealth. The workers and enterprises building the bridges to nowhere spend their earnings, boosting consumption, and the incoming tide of capital chasing speculative gains boosts the value of the assets being chased.

“But bridges to nowhere and speculative frenzies don’t actually boost the productivity of capital or labor; they are mal-investments that bleed the economy dry behind a flimsy facade of phantom wealth, a facade generated by the enormous tide of capital gushing into the economy.

“Once the tide recedes as capital votes with its feet, the facade of phantom wealth collapses.”

“When energy is cheap and abundant, all sorts of things become possible. When energy becomes scarce and costly, all sorts of things are no longer financially viable.

“Economies that only function if energy is cheap and abundant unravel when energy becomes scarce and costly.”

IF WE’RE TO BE UNDONE, LACK OF CHEAP, ABUNDANT ENERGY WILL BE OUR UNDOING.