'The new global Iron Curtain virtually ensures shortages and bouts of panic buying of key commodities over the foreseeable future..''Historic Q1 2022. Inflation, a Hawkish Fed, Spiking Bond Yields, War, China and Acute Instability. Where to begin?
“Inflation Hits a New 40-year High.” “Bond Market Suffers Worst Quarter in Decades.” “Commodities Finish Best Quarter in 32 Years.” Greatest ever divergence between financial assets and Hard Assets? “China Home Sales Slump Worsens Despite Vows to Support Market.” “China Growth Outlook Worsens as Manufacturing, Home Sales Slump.” “Recession Warning Sign Flashes as Yield Curve Inverts.”
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It has been my long-held concern that a bursting Chinese Bubble would be associated with heightened geopolitical risk. This thesis is coming to fruition. I don’t see the timing of Russia’s invasion as coincidence. China and the world are transitioning from a historic boom and Bubble period. Animosity and conflict are inescapable cycle shift fallout.
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Results from the private China Beige Book survey signal a broad-based tightening of financial conditions that should not be disregarded.
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Beijing’s “Covid zero” policy has pushed a teetering economy over the ledge. Many supportive comments from government officials over recent weeks have done little to bolster general confidence. The rapidly deteriorating backdrop this week elicited the strongest indications yet of imminent stimulus measures. I expect Beijing will face the harsh reality that customary reflationary tactics will prove much less effective in today’s post-Bubble environment.
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The new global Iron Curtain virtually ensures shortages and bouts of panic buying of key commodities over the foreseeable future, perhaps somewhat offset by deteriorating Chinese economic prospects. It’s difficult to envisage a backdrop with greater uncertainty. For starters, how does the War unfold? Would the West be willing to loosen sanctions as part of a peace deal after Russia so brutally pulverized Ukrainian cities? How long might China escape U.S. and European animus for its Russian brotherhood? How significantly does the unfolding new world order hinder financial and economic flows? Moreover, how might central bankers respond to faltering markets in an economic war backdrop where the performance of securities markets will be viewed as indicating relative war success or failure? It was a wild and deeply troubling Q1. Little reason to expect much different for Q2.'
- Doug Noland,
Historic Q1 2022, April 1, 2022
Context(Stagflation)(Real price-inflation at 15%) - '..inflation spiraling completely out of control.'(Mandela)(UN Responsibility to protect (R2P))(Russia commits crimes against humanity in Ukraine) - Shield against drones, aircraft, missiles, rockets and mortars (air exclusion zone)