From Rabobank via ZeroHedge, March 7, Pre-Powell.
Jumping into the middle section from https://www.zerohedge.com/markets/history-world-part-ii:
....Even ‘vanilla’ supply-chain issues linger despite the drop in the Global Supply Chain Pressure Index (GSCPI). A great way for analysts to show they don’t understand complex logistical issues is for them to refer to the GSCPI as ‘proof’ that supply chains are ‘healing’. Try explaining that to those in the industry seeing the global tanker fleet shrink as they opt to ‘go dark’ and trade Russian energy. Or as the “Pentagon sees giant Chinese cargo cranes as possible spying tools.” This doesn’t mean ocean carrier rates are not falling – they are. However, ‘Shippers want stability and service, not rock-bottom freight rates’. Indeed, a procurement executive is quoted saying he had spot cargo moving at “below $1,000 per box”, and had been offered even lower rates, but doesn’t feel comfortable about it because, “At some stage, the rate is going to shoot right back up, there’s just no stability and we can’t budget.” That backdrop is not one where goods --or capital-- flow, and inflation stays low, like before; that implies firms will keep acting to collectively raise prices; then workers will act up to try to keep up.
If US durable goods inflation drifts up to where it sat in an earlier phase of globalisation, it would average 4% y-o-y, not 2%. In which case, services inflation needs to come down much more, meaning far higher rates and far lower asset prices, or the inflation target will be repeatedly missed, or it may even have to be raised. Historic volatility lies ahead of us whichever way. (Indeed, despite 2023 market calls for a weaker US dollar, Bloomberg yesterday reported ‘World’s riskiest markets stumble into crisis with dollars scarce’, and Reuters noted ‘Chinese companies hang on to dollars, hedge to prepare for volatile yuan’.)
Of course, raising rates now more would be crazy given US drivers are fighting over expensive used cars and 15% of those who financed a new vehicle towards end-2022 are reportedly paying $1,000+ a month to do so. However, pausing rate hikes as a precursor to cutting rates again would be even stupider – indeed, the ECB’s Holzmann yesterday spoke of four more half-point hikes ahead(!)
Which is why, as I have repeatedly flagged, both logic and the history of the pre-1981 world show the only solution may be ‘rate hikes and QE’, i.e., some form of bifurcated monetary, fiscal, and industrial policy rather than a one-size all Fed easing or tightening. Some others are arguing for similar policy. If the San Fran Fed have woken up to the fact that lower rates don’t do any good, and higher rates may not either, than surely we can’t be too far away from seeing a new script for the first time in decades? Laugh at the idea if you want, but those who don’t learn from history are doomed to repeat it.
Powell will consider his own future position in it when he testifies today. Perhaps it isn’t always good to be the king.
It would take a master politician to deal with the capital, labor, monetary, fiscal and industrial policy realms.
It is my pleasure to nominate both Kang and Kodos to the new combined Fed/White House:
From UPDATED: Short General Motors on the IPO:
Good grief.
I swear the only thing THAT reminds me of is the
Simpsons' episode where the aliens, Kang and Kodos plot to become
Earth's Overlords via the American political system:
Here's Kang showing off his (her?) political skills:
Maybe GMC's truck division can use another bit from the same episode:Kang on politics:Kang: Abortions for all.
[crowd boos]
Very well, no abortions for anyone.
[crowd boos]
Hmm... Abortions for some, miniature American flags for others.
[crowd cheers and waves miniature flags]
From episode 4F02 "Treehouse of Horrors VII"
Kodos on P.R. spin:One night, Springfield holds a Dole-Clinton debate. Clinton is giving
the opening speech:
"My fellow Americans. As a young boy, I dreamed of being a baseball, but tonight I say,
we must move forward, not backward, upward not forward,
and always twirling, twirling, twirling towards freedom."
