Hey tards,

This is just my thought process before the new year, so don't take it too seriously. I may even have an extra chromosome...

I'll go from macro to micro or whatever...

Globally, swords are drawn. But let's look where we're at. Monetary policy, inflation, and international trade numbers first:

China:

It's up to you to trust data coming out of Pooh Bear's rear side.

Inflation around 2%,

One year lending rate at 3.65%

International Trade Surplus: Around $60 Billion per month

US:

Inflation: Just above 7%

Interest rate: 4.5%

Trade deficit: Around $70-75 Billion per month

EU

Europoors are just doing Europoor things.

Inflation: Around 10%

Interest Rate: 2%

Trade Deficit: Around $40-45 Billion per month

Japan

Inflation: around 3.5%

Interest Rate: 0.5%

Trade Deficit: Around $12-13 Billion per month

Japan and EU have had trade deficits since covid which is a reversal to what had been the norm previously.

Trade deficits weakened their currency, weak currency increased their deficit due to reliance of imported raw materials and increasing energy prices. So now they have increased their negative rates for the first time - which may be a bit late but we shall see.

QE ran its course and now global tightening policies are in effect. But real interest rates are still absurdly negative so there is that and fed believes liquidity in the markets is a good thing so junk bonds can live another day... or whatevs.

ECB is tightening a bit more aggressively and actually going to pull some liquidity for the first time since early 2000s. They are starting with something around 300 Billion Euros. Also ECB's minimum reserve mandate is in effect, whereas in the US IIRC there is still no minimum reserve requirement for banks.

So what are these telling me? China has no liquidity issues and is still able to push strong export numbers despite covid. EU is struggling and trying to do the right thing which is too naive I think. US is a fucking shitshow; it's still pretty much BRrrrr but with higher nominal interest rates. Japan is holding steady and trying to manage Yen's value only.

I don't think we will see a collapse of a market this year. Even as a gay bear, I just don't see it. I can see the collapse of USD at some point before 2030, but I don't see how markets can crash with this much liquidity pumped in to the system.

What's concerning is Europoors' honest attempt to do QT right. Where the hell have you been in the last year when inflation got out of hand? Maybe they thought it would just go back to normal as supply chain issues are resolved. Again... how naive. I strongly believe EU will be abolished in the next 2-3 years.

Another concerning trend is lack of velocity of money. Money isn't going around in the real economy. It doesn't make as many stops in a month as it used to. Banks are creating too much overhead in the system and are too efficient to collect everything from real economy and pump into finance. It's not just us. It's a whole trend. Every time someone outbids other prospective buyers above asking at a home purchase, every time you decide to finance something beyond your means, every time you "invest" instead of spending, money gets sucked up into finance and does not trickle down much. So now we're at our limit. Consumer debt is gonna bite North Americans in the ass.

Anyhow... I just cracked another cold one.

Recession is already in the room with us. It has been. All this extra juicy M2 is not for nothing. People panicked; Simple as that. Covid hit and people started reevaluating their life choices and sitting at home during lockdowns was an eye opening experience for many. Why do we have to go to the office? Why do we have to work 40 hours and still can't have the basics? Very legitimate questions that got no real answer from those in the government. These are thanks to boomers getting the fuck out of workforce because they already got everything. It finally sank in with them. Wealth gap is at a whole other level now and monkeys want more peanuts.

Many industries started downsizing like tech. They will stay lean for a few years at least. So if you're in tech get ready for your new norm.

Currently we are rolling back globalization at some level and spreading it on others. For example, supply chain issues made countries realize the importance of building at home rather than relying on imports for essential and strategic goods and services. On the other hand, globally, those that do produce and export, like China, will benefit bigly until they can't.

There is a whole restructuring happening and the biggest opportunity is right in front of your eyes. You just gotta decide when is a good time to get in. All these investments to adapt to the NOT new world order will eventually bear fruit. But, let's not forget, globalization occurred due to necessity. Economies of scale allowed lower prices and low margins with high revenues. This is not coming back. In a world separated into new axes, we will have new equilibriums in different markets. Consumer prices were suppressed so much between mid 2000s to 2020. It's only catching up to what it should have been. You're paying so much more for many services, education, homes etc. You think cost of producing most household items or produce stayed the same all this time? Tech improvements and economies of scale allowed that. We ain't got that economies of scale and efficient supply chain no more.

The only way this will all make sense is with inflated real estate prices going back to somewhere attainable by working people. Currently working class in North America is being paid piss pour in relation to cost of living in our countries, and being paid a few times more than someone doing the same job in a developing country. They just can't afford to pay you more due to global competition. Distribution of money has always been the biggest flaw and here we are trying to figure it out again...

TL:DR I'm slightly drunk and Inflation ain't going nowhere.

I shall continue tomorrow...