Weekend Commentary: Perils of Unsound Money
The comments below are an edited and abridged synopsis of an article by Doug Noland
The consequences of decades of unsound money are coming home to roost. Nations are hopelessly divided in an increasingly decoupled world. Predictably, inflation and bubbles are sowing inequality, insecurity, hostility and conflict. Trust in critical institutions continues to wane.
The costs associated with this epic policy failure will be huge, possibly catastrophic. Inflation won’t return to the previous cycle’s relative quiescence. The toll on society will be tragic; the triple trouble of inflation, bursting bubbles and monetary disorder. And since this credit bubble and inflations have been global phenomena, geopolitical hardship could prove even more consequential.
Noland discusses trillions in monetary inflation around the world; the Ukraine war; the current financial picture in the US; inflation dynamics making a return to stability extremely difficult; China’s renminbi dropping concurrently with the Japanese yen; the last few months on the US stock exchanges; the Fed; and looking to the future.
“Confidence in China’s recovery wanes. The new BOJ governor faces a disorderly yen devaluation and fragile bond market. [The] already destabilized global market—especially the vulnerable European periphery and EM—gets hit by geopolitical developments. Escalation in the Ukraine war—nuclear blackmail. The US responds to Chinese war support with sanctions—China reciprocates. Things become heated. Global markets turn dicey, with pressure on the Fed to intervene with bond market-stabilizing QE. With one eye on shaky markets and the other on sticky inflation, how will the Powell Fed respond? Will it suffice? Years of unsound ‘money’ coming home to roost.”
Up for discussion: Markets for the week; currency watch; commodities watch; market instability; bursting bubbles and mania; crypto bubble collapse; Ukraine war; US/Russia/China/Europe; de-globalization and Iron Curtain; inflation; the Biden administration; the Fed; the US bubble; fixed income; China; central bankers; Japan; the global bubble; the EM crisis; social, political, environmental, cybersecurity instability watch; leveraged speculation; and geopolitics.