“Outside the US borders, the global economy is slowing and the stronger dollar and its influence in financing global finance is promoting a high probability of tightening financial conditions causing great stress for many dollar-dependent nations. If the consensus for an increase of 75 BASIS POINTS is correct look for the FED TO BE EXTREMELY HAWKISH WITH ITS USE OF THE DOT PLOTS. That’s the tool the FED has used to provide FORWARD GUIDANCE FOR MANY YEARS. The central bank has maintained that they would move away from FORWARD GUIDANCE but its use is too valuable a tool on a cost-benefit basis.”

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“Investing in bringing the value chain closer to home and in reducing dependency on polluting energy sources is a win-win strategy. ”

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“Until the Fed shows some understanding of the issues here discussed and until they move to implement policies that will remove inflationary pressures and incentives to misallocate resources, we see no need to abandon our investment stance. It can be summed up as bullish on inflation and not bullish on growth.”

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“The FED cannot eliminate supply bottlenecks but it can reduce demand by raising rates and reducing liquidity through WEALTH DESTRUCTION. That means crushing the global stock markets as the Telegraph’s Ambrose Evans-Pritchard wrote in an oped, “The US Federal Reserve actively wishes to crush Stock Markets: Ignore It At Your Own Peril.” Evans-Pritchard delineates what the FED‘s objective is, and Powell and his minions, “are now on a mission to redeem themselves and prove they can conquer inflation after all. Zeal is a dangerous thing. That is why I fear the Jackson Hole of 2022.”

I believe the strong dollar is going to unleash some real pain upon the global financial system, which will fall back on the FED. Good thing the swap lines and repo facilities are in place to backstop the entire global financial system. Those who praise the strong DOLLAR are singing from a 1970s hymnal when trade was paramount to finance. But in today’s world of FED policy unleashing massive dollar funding upon the emerging markets, be very careful. KING dollar is not what it once was and this is coming from an Austrian-based sound money analyst.”

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“he EQUITY markets have recovered more than 50% of their first-half losses stoking the call from WALL STREET that it is all clear WEENA. BUT I CAUTION: This is not an INVESTING MARKET BUT TRADING MARKET as we await to hear from Chair Jerome Powell on the FED‘s future path, especially as the central bank’s balance sheet reduction ramps up to its maximum levels next month. NOBODY can be certain of the impact of removing liquidity from what has been an over-leveraged market living on the liquidity drug provided by QE.”

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“I also posit that the rise in rates may have been in response to a note published Monday night by Zoltan Pozsar, titled War and Interest Rates. The piece covers our favorite topic: global political economy. It is worth reading at least twice. A key takeaway is that Pozsar maintains that we need to take Powell at his word about his will to fight inflation and that the “risk of the FED hiking to 5or 6% is very real, and ditto the risk of rates cresting there despite economic and asset price pain.” If Pozsar is correct … well, do the math.”

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“Events which are presented as solely financial can also serve geopolitical aims beneath the domestic-centric rah-rah.”

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“The strong dollar is not a blessing in these tumultuous financial conditions as it places a great deal of stress on the world’s emerging markets, which are BORROWED in US DOLLARS due to the FOMC’s flooding the global system with very low interest possible loans. Cheap dollar loans become expensive when interest rates rise and the cost of DOLLARS rise along with it. A classic case of this was in January 2015, when Eastern European countries borrowed in Swiss francs because of low Swiss interest rates coupled with a guaranteed level of euro/Swiss franc at 1.20, A NO BRAINER.

But when the Swiss National Bank could no longer hold the PEG the market panicked and the SWISS FRANC rallied in dramatic fashion, leaving borrowers stuck having to repay with expensive Swiss francs. This is the current situation confronting the massive amount of loans held by private and public emerging borrowers with prior cheap dollar loans. This is just the beginning of this important discussion. ”

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“No sé si Milei tiene razón en cuanto a la oportunidad y el método, pero definitivamente los bancos centrales son como un cáncer al que debería ponérseles fin.”

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“Financial instability is going to force the Fed out of its proposed policy path. There is so much risk showing up in things like credit default swaps on European banks or emerging market bonds. Our 21 Lehman systemic risk indicators globally are the highest since the financial crisis, a lot of these risk metrics blew through Covid levels which is really bad. That means the Fed is not going to be able to complete the job on inflation which gets you to inflation sticking around at something like 3 to 6%.”

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