Unleash inflation dynamics – in the markets and/or the real economy – and getting it back under control will invariably inflict magnitudes of harm, pain and market “roil” necessary to alter behavior and quell inflation psychology.
last year’s Bubble inflation went to perilous extremes. This significantly raised the odds for a destabilizing 2022 bursting episode.
We need to place the Fed’s 2021 blunder into proper context. Compound mistakes over a long period, and associated risks explode exponentially. The Federal Reserve is now 13 years into a failed QE experiment.
Global markets appear acutely vulnerable.
We have an interesting Fed meeting coming next week. If the market rally holds through Wednesday, it will be difficult for the Fed not to upsize taper and talk “hawkish pivot.” Meanwhile, the type of volatility experienced throughout global markets is stealthily at work impairing liquidity.
Powell’s dismissive approach to inflation risk was both untenable and an increasing embarrassment.
Once again, the wily Covid virus boasts ghostly timing. Omicron barges in with de-risking/deleveraging and global Crisis Dynamics attaining pivotal momentum. And with contagion rapidly enveloping the emerging markets (EM), disaster strikes.
I am not optimistic about the impact Europe’s Covid outbreak will have on the unfolding global financial crisis. Once again, Covid brandishes nefarious timing. China-related contagion had already created vulnerability. Now fledgling global “risk off” has de-risking/deleveraging increasingly impairing liquidity at the “Periphery.”
they got stuck in this narrative and they held on to it for too long, and the result of which is they’re looking at inflation that is much higher than they ever expected; they’re looking at inflation that is much broader than they expected; and they’re looking at inflation that is going to last even longer than they expect even now. So, it’s going to go down in history as one of the worst inflation calls by the Federal Reserve.”
More evidence this week of a historic mania running unchecked. 1999 was crazy, but at least that mania was relatively contained within Internet and technology stocks. It wasn’t fueled by Trillions of central bank monetary inflation. These days, manias are everywhere