Fed Chairman Jerome Powell has summoned the ghost of Paul Volcker, circa 1978, with a monetary regime that is hell-bent on generating PAIN, economic pain, as a means to "defeating" inflation. Powell has pledged to use the Volcker "playbook", draconian rate hikes that squelches final demand to bring it into line with lower supply, even if it means sparking a recession. But it goes further, as Powell cannot justify pausing the monetary tightening until there is DISINFLATION in ASSET PRICES too! Pain in stocks, and a Gold price that is NOT threatening to bust through $2000 and reach record highs.
But there's more … MUCH MORE … the ECB, European inflation, money supply deflation, and shrinkage in the demand for credit … not to mention one of the MOST VICIOUS debasements of the purchasing power of a currency we've seen in years, taking place in Turkey, with the deepest ever trade deficits, a CB that is cutting rates into a Lira depreciation, where it takes five times as many Lira to buy an ounce of Gold as it did in 2019, and Food inflation running at +70% year over year. A crisis in the making?
And then there's Pakistan, where the CB raised their Policy Rate by +300 bp on Friday, after the Rupee plunged to a new record low, following TAX HIKES and fiscal tightening by the government. A crisis in the making here too?
Greg discusses ALL of this, and the Crude Oil market too … because to him EVERYTHING matters.
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