售罄：供应链断裂、通胀飙升和政治不稳定将如何拖垮全球经济
https://www.amazon.ca/Sold-Out-Inflation-Political-Instability/dp/0593542312
作者：詹姆斯·里卡兹（James Rickards）（作者）2022 年 12 月 6 日
吉姆·里卡兹（Jim Rickards）曾预测美国历史上最严重的经济危机，他的第二个预测是——全球经济崩溃。
供应链危机即将到来。如今，您最喜爱的产品已从商店货架上消失，陷入太平洋某个地方的供应链困境。但六个月甚至三年后，这种供应链中断会是什么样子呢？虽然我们希望大流行后的复苏能够解决这些问题，但现实是数字货币、迷因和社交媒体无法解决跨越海洋和大陆生产和运输实物商品的古老问题。吉姆·里卡兹表示，消费者的不满只是威胁全球经济崩溃的巨大冰山一角。
在《售罄》一书中，里卡兹分享了他对大流行后未来的预测，并概述了消费者和企业主如何在崩溃之前渡过难关。您将了解由与澳大利亚的贸易战引发的中国能源短缺如何扰乱钢铁市场并迫使整个工厂关闭。您还将了解到通货膨胀率上升将如何在短短几年内最终导致通货紧缩——因为消费者支出最终会因税收增加、债务过多和裁员增加而减少——以及为什么这种经济状况将与 1930 年代非常相似。最后，里卡兹将展望货币的未来，包括美元本身的消失。
未来几个月，我们的全球经济将面临前所未有的挑战。但我们是沉还是浮取决于我们的准备程度以及我们现在采取的措施来阻止即将到来的崩溃。
Book list of James Rickards
https://dailyreckoning.com/author/jrickards/
Video: James Rickards Calls Out Establishment Republicans
https://rumble.com/v4ts3ao-james-rickards-calls-out-establishment-republicans.html
May 7, 2024
"The Radicalism Is The Speaker Of The House Who Is Basically Working With The Democrats": James Rickards Calls Out Establishment Republicans
詹姆斯·理查兹 James G. Rickards，1951 年 9 月 29 日
https://en.wikipedia.org/wiki/James_Rickards?
是一位美国律师、投资银行家、媒体评论员以及金融和贵金属领域的作家。他是《货币战争：下一次全球危机的形成》（2011 年）和其他六本书的作者。他目前住在康涅狄格州。
Rickards 于 1969 年毕业于新泽西州开普梅地区高中。1973 年毕业于约翰·霍普金斯大学，获得荣誉文学学士学位，并于 1974 年毕业于保罗·尼茨高级国际学院在华盛顿特区学习，获得国际经济学硕士学位。他获得了宾夕法尼亚大学法学院的法学博士学位和纽约大学法学院的税务法硕士学位。
他曾在花旗银行、长期资本管理公司和 Caxton Associates 担任高级职务。作为对冲基金长期资本管理公司 (LTCM) 的总法律顾问，他于 1998 年通过美联储成功谈判了对该公司 36 亿美元的救助。里卡兹在华尔街工作了 35 年。后来，Rickards 成为位于纽约市的商业银行 Tangent Capital Partners LLC 的高级董事总经理，以及位于弗吉尼亚州麦克莱恩的技术、专业和科学咨询公司 Omnis, Inc. 的市场情报高级董事总经理2009年3月24日，里卡兹在约翰·霍普金斯大学的一次研讨会上发表了自己的观点，认为美元面临迫在眉睫的恶性通货膨胀，很容易受到外国政府通过积累黄金和建立新的全球货币的攻击。
2009 年 9 月 10 日，里卡兹在美国众议院科学监督小组委员会就金融模型、风险价值和 2008 年金融危机的风险作证。
他还声称自己就全球金融问题向美国国防部、美国情报界和主要对冲基金提供咨询，并担任五角大楼首次金融战争游戏的协调人。他还在西北大学凯洛格学院和约翰霍普金斯大学高级国际研究学院担任客座讲师。他表示，他是制裁和非法金融中心的顾问委员会成员，该中心是华盛顿特区的右翼智囊团和游说组织捍卫民主基金会（FDD）的前组织。
刊物
里卡兹的第一本书《货币战争：下一次全球危机的形成》于 2011 年出版。在书中，他认为货币战争不仅是经济或货币问题，而且是国家安全问题。他坚持认为，美国的国家安全面临着严重威胁，从中国秘密购买黄金到主权财富基金的隐藏议程，而比任何单一威胁更严重的是美元本身崩溃的真正危险。里卡兹指责美联储参与了他所谓的“金融史上最大的赌博”。他写道，美联储通过降低长期利率来放松金融状况“本质上是一项印钞刺激经济增长的计划”。
里卡兹随后又创作了六本书：
货币之死：国际货币体系即将崩溃 (2014)
大跌：如何在即将到来的崩溃中增加你的财富 (2015)
黄金新案 (2016)
毁灭之路：全球精英应对下一次金融危机的秘密计划 (2016)
后果：在即将到来的混乱中保存财富的七个秘密 (2019)
新大萧条：大流行后世界的赢家和输家（2021）
售罄：供应链断裂、通胀飙升和政治不稳定将如何拖垮全球经济（2022 年）
里卡德的第二本书《金钱之死》于 2014 年 4 月 8 日出版，并成为《纽约时报》畅销书。他的第三本书《黄金新案例》于2016年4月5日出版。他的第四本书《走向毁灭：全球精英应对下一次金融危机的秘密计划》于2016年11月15日出版。
在《走向毁灭之路》中，里卡兹宣扬了一种阴谋论，即“全球精英”正在利用气候变化这匹“木马”来推进包括全球货币在内的“世界新秩序”。
这是里卡兹在各个平台上表达的观点：
全球精英正在利用气候变化作为幌子来推动全球税收和全球治理议程。
—吉姆·里卡兹（Jim Rickards），全球精英的问题——当金钱被武器化时
他是《金融时报》、《标准晚报》、《纽约时报》和《华盛顿邮报》的专栏撰稿人。他是财经通讯《战略情报》的编辑，也是詹姆斯·里卡兹项目的总监，该项目旨在探究地缘政治和全球资本的复杂动态。
通货膨胀很快就会转向通货紧缩吗？
https://dailyreckoning.com/will-inflation-soon-turn-to-deflation/
詹姆斯·里卡兹 作者：詹姆斯·里卡兹 2023 年 7 月 6 日
你能预期持续的通货膨胀——还是通货紧缩甚至通货紧缩的趋势吗？这可能是当今经济学中最重要的问题。
这不仅仅是一个相互竞争的叙述问题。这个问题涉及现代经济学的核心（所谓的新凯恩斯主义共识）和经济预测中使用的模型。
事实上，它通常涉及经济学的核心，并有助于解释为什么如此多的预测如此严重错误。
通货膨胀的叙述很简单。从 2021 年中期开始，通胀势头强劲，直到 2022 年 6 月达到 40 年来的最高点。这一峰值为 9.1% 的通胀率，这是 1980 年代初以来的最高水平。与此同时，失业率处于 3.4% 左右的低点，这是 20 世纪 60 年代末以来的最高水平。
高通胀和低失业率的结合似乎证实了菲利普斯曲线的有效性，该曲线假定通胀和失业之间存在负相关关系。当失业率低时，通货膨胀率就高，反之亦然。
通货紧缩的理由
包括通货紧缩在内的通缩叙述也很简单。到 2021 年底，美联储越来越担心通胀并决定采取行动。美联储于 2022 年初开始收紧货币政策，通过不展期到期抵押贷款和美国国债来减少基础货币供应量。
他们进一步收紧政策，从去年3月开始连续10次加息，一直持续到今年5月。 （美联储在 2023 年 6 月没有加息，但暂时保留了进一步加息的选择。）这使美联储的政策利率升至 5.25%，这是美联储历史上该幅度最快的升息之一。
美联储的货币紧缩政策似乎奏效了。通货膨胀率已从去年 6 月的 9.1% 降至今年 5 月的 4.0%。这仍然远高于美联储 2% 的目标通胀率，但确实代表着朝着这一目标取得了重大进展。
看来美联储要做的就是再一次加息，也许是这个月，耐心等待，通胀很快就会回落到美联储的目标利率。如果温和的衰退和更高的失业率是这一成功的代价，那么这就是美联储主席杰伊·鲍威尔准备付出的代价。
如果说这种两年通胀-通货紧缩的叙述看起来过于简洁明了，那么事实确实如此。
标准的经济模型和简单的解释在很多地方都失效了。事实上，这种细分如此广泛，以至于让人怀疑美联储和主流经济学家是否知道他们在做什么。
最好的证据是他们没有。
菲利普斯曲线是垃圾科学
首先，菲利普斯曲线表明，通胀下降应该伴随着失业率上升。但那并没有发生。 5 月份失业率从上个月的 3.4% 上升至 3.7%，但目前的失业率仍处于 20 世纪 60 年代以来的最高水平。
3月份失业率为3.5%，2月份失业率为3.6%。事实上，即使在货币紧缩16个月之后，失业率也没有大幅上升。
20世纪30年代是高失业率和低通胀时期。 20 世纪 60 年代是低失业率和低通胀时期。 20 世纪 70 年代末是高失业率和高通货膨胀时期。
历史和数据表明，失业和通货膨胀之间不存在相关性。
我们必须在其他地方寻找具有真正预测价值的解释因素。同样，尽管美联储收紧政策，但经济衰退并未出现在数据中。自上次经济衰退结束以来已经过去了 38 个月。期间年均增长率为5.88%。
2023 年第一季度增长率为 1.3%。根据亚特兰大联邦储备银行的 GDPNow 预测，2023 年第二季度的预计增长率为 2.1%。最近的增长数据虽然疲弱，但并未出现衰退。
有充足的衰退警告信号，包括收益率曲线倒挂，我预计衰退很快就会发生。但它还没有到来。
如果失业率仍然很低，经济继续增长，股指处于泡沫之中，尽管美联储历史性地收紧货币政策，这就会让人对美联储的模型以及主流新凯恩斯主义共识产生质疑。
这是怎么回事？
基于模型的预测的第一个缺陷是分析师未能区分供应方出现的通货膨胀和需求方出现的通货膨胀。从预测的角度来看，这种差异至关重要。
消费者行为心理学
2021-2023年的通货膨胀是真实存在的，但它是由供应链瓶颈以及关键商品和工业投入的短缺造成的。乌克兰战争引发的前所未有的经济和金融制裁加剧了供应链中断。
这种供给侧通胀往往会自我否定。高价格导致需求减少，进而导致价格下降。我们每天都会看到这种情况，从加油站开始，2022 年夏季创纪录的高价已大幅下降（尽管仍高于 2021 年）。
我们看到欧佩克决定削减石油产量以支撑价格的进一步证据。简而言之，通货膨胀是真实存在的，但它已经因为与美联储无关的原因而消退。
模型的第二个缺陷是未能理解如果通胀持续足够长的时间，通胀从供给侧转向需求侧的过程。这是消费者心理的变化，并体现在行为反应中。标准模型无法解释心理和行为。
如果通货膨胀心理在公众中占据主导地位，那么尽管经济衰退和实际工资下降，这种心理也可能会自行蔓延。模型没有显示这一点，但历史却显示了这一点。这正是 20 世纪 70 年代发生的事情。
通货膨胀可能是一件顽固的事情
随后，随着 1973 年赎罪日战争后阿拉伯石油禁运，通货膨胀从供给侧开始。 1973年至1975年间，美国经历了严重的经济衰退，失业率最高达到9.0%。美国在 1980 年经历了另一次经济衰退，并在 1981 年至 1982 年经历了第三次经济衰退，失业率达到 10.8%。上次经济衰退是大萧条以来最严重的一次。
尽管九年间经历了三次经济衰退、两位数的失业率和两次股市崩盘，但 20 世纪 70 年代中后期和 80 年代初却出现了二战结束以来最高的通货膨胀率。到1981年，通货膨胀率达到15%，利率提高到20%以对抗通货膨胀。
低增长和高通胀的结合称为“滞胀”。 1973年从供给侧开始的通货膨胀到1977年已经转移到需求侧，并且已经失控。经济衰退无法阻止它。
即使在经济困难时期，消费者也会以合理的方式应对通货膨胀。他们加速购买，因为他们预计价格会进一步上涨。他们利用杠杆购买硬资产和股票，因为他们将这些视为抵御通胀的避风港。
零售商提高价格是为了满足更高的工资成本并维持利润。整个过程以自身为基础。即使在经济衰退的情况下，这种自助也可以继续下去，就像 1975 年和 1981 年那样。
英国已经出现滞胀，英国CPI通胀率为8.7%。与此同时，英国正濒临衰退，22 年第 4 季度和 23 年第 1 季度经济增长 0.1%，此后增长预测转为负数。滞胀不仅仅是历史上的异常现象。这是当今的现实。
我们到了那个时候了吗？我们是否处于一个人性决定通胀防御策略的世界，尽管可能出现经济衰退和货币紧缩，但通胀防御策略仍会自我维持？
我们看到了这方面的一些证据，包括纽约市工会教师的一份新的五年期合同，该合同提供拖欠工资和签约奖金，并将工资提高 20%。
没有必要争论教师是否值得加薪。显而易见的事实是他们明白了。而且类似的例子还有很多。教师和其他人的工资上涨需要多长时间才能推动更多的消费者需求和更高的零售价格，从而抵消工资涨幅。
经济可能会像 1979 年一样繁荣。
使用杠铃策略对抗通货膨胀/通货紧缩拉锯战
经济衰退和股市下跌的可能性很高。尽管如此，持续通胀和高利率的可能性也很高。不管标准模型怎么说，这两种现象并不矛盾。
我们曾在 20 世纪 70 年代末和之前的剧集中见过他们在一起。
我们可能会看到通货膨胀和利率持续时间比华尔街和美联储预期的要长。 （顺便说一句，如果您有兴趣更深入地分析这一通货膨胀-通货紧缩难题，请参阅我最近出版的《售罄》一书的第 4 章和第 5 章。
考虑到通货膨胀/通货紧缩斗争的不确定性，投资者的最佳方法是采取多元化的杠铃策略，以防范通货膨胀和通货紧缩。
一个模型投资组合可以用黄金、自然资源和能源股作为通胀对冲，用国债作为通货紧缩对冲，并在杠铃两端之间健康地分配现金，以便在情况变得更加明朗时提供流动性和选择性。
我将继续关注这些进展并随时向读者通报情况。敬请关注。
货币战争：下一次全球危机的形成
作者：詹姆斯·里卡兹 2012 年 8 月 28 日
https://www.amazon.com/Currency-Wars-Making-Global-Crisis/dp/B00DPNUVLC
已经开始的全球货币战争将如何影响我们所有人。美元贬值、对希腊和爱尔兰的救助以及中国的货币操纵都是明确的迹象，表明我们正在经历一场新的货币战争。货币战争是一国货币对其他国家货币的一系列竞争性贬值，是国际经济中最具破坏性和最令人恐惧的结果之一。如果不加以控制，新的货币战争可能会导致比 2008 年恐慌更严重的危机。《货币战争》结合了经济史、网络科学和社会学，深入了解了美元对美国国家安全日益增长的威胁。欧洲外围国家的货币贬值到崩溃、非洲国家的失败、中国的新重商主义、俄罗斯的冒险主义以及当前的黄金争夺战。曾在金融和国家安全最高层工作过的专家詹姆斯·里卡兹（James Rickards）解释了我们需要了解的一切。了解这一日益严重的全球僵局。他闭门带领世界各地的读者通过引人入胜的第一手轶事解释复杂的金融和政治潮流。
金砖国家抢占世界制高点
https://dailyreckoning.com/brics-seize-worlds-commanding-heights/?
作者：詹姆斯·里卡兹 2023 年 8 月 28 日
金砖国家领导人峰会于8月24日结束，作出自2010年以来首次扩大金砖国家成员规模的重大决定。
沙特阿拉伯、阿拉伯联合酋长国、埃及、阿根廷、埃塞俄比亚和伊朗均于 2024 年 1 月 1 日起获准加入。巴西和印度对此均持保留态度。
但最终，俄罗斯和中国不顾反对，用自己的力量推动了新成员的加入。金砖国家现在是金砖国家+，拥有 11 名正式成员，并正在走向更大的政治权力和新的货币联盟。
这是一个重大的发展，尽管其影响需要时间才能完全显现出来。
由于成员数量的扩大，新的金砖国家货币将在明年出现。
这是因为所有现有和未来的金砖国家成员以及整个南半球国家（包括上海合作组织和欧亚经济联盟的成员）都在遭受美元武器化的影响。
他们担心他们的美元计价储备可能会被美国冻结，就像俄罗斯最近发生的那样。
他们的解决方案是建立一个足够大的新货币联盟，以提供绕过美元的各种商品和服务（最终是债券）。这不会在一夜之间发生，新货币将面临挑战，但这一过程正在开始。
金砖国家成员扩大的影响实际上远远超出了货币联盟的范围。
随着沙特阿拉伯、伊朗和阿联酋的加入，金砖国家现在已经有效包围了波斯湾。随着埃及和沙特阿拉伯的加入，他们现在有效地控制了红海和苏伊士运河。
与此同时，阿根廷的加入使金砖国家控制了从大西洋到太平洋的麦哲伦海峡（祝德雷克海峡好运；我去过那里。这是一个令人畏惧的水域）。
金砖国家正在向地缘政治理论家哈尔福德·麦金德和海军战略家阿尔弗雷德·马汉的双重愿景靠拢。哈尔福德·麦金德是一位地缘政治理论家，他的世界岛和心脏地带的概念都以亚洲为基础；阿尔弗雷德·马汉是一位海军战略家，他的海上力量理论强调对关键海峡和其他海域的控制。阻塞点。
金砖国家正在巩固对陆地和海上历史枢纽的实际控制。
金砖国家成员的扩大也标志着石油美元时代结束的开始。沙特阿拉伯加入金砖国家是朝这个方向迈出的一大步。这就是为什么新成员的加入和新货币的推出不能孤立地看待。
它们是一个共同项目的两个部分。扩大的会员国正是使新货币更加可行的原因。
这一切都发生在美国决策者的眼皮底下，他们似乎对历史和时事一无所知。
BRICS Seize World's Commanding Heights
https://dailyreckoning.com/brics-seize-worlds-commanding-heights/?
by James Rickards August 28, 2023
The BRICS Leader’s Summit ended on August 24 with a momentous decision to expand the membership of BRICS for the first time since 2010.
Saudi Arabia, the United Arab Emirates, Egypt, Argentina, Ethiopia, and Iran were all admitted to membership effective January 1, 2024. Both Brazil and India have some reservations about this move.
But in the end, Russia and China used their muscle to push through the new members despite objections. The BRICS are now BRICS+ with eleven full members and on their way to greater political power and a new currency union.
This is a momentous development, though its effects will take time to fully manifest themselves.
As a result of this expanded membership, the new BRICS currency will emerge in the year ahead.
This is because all current and prospective BRICS members and the entire Global South (including members of the Shanghai Cooperation Organization and the Eurasian Economic Union) are suffering from the weaponization of the U.S. dollar.
They fear that their dollar-denominated reserves may be frozen by the U.S., as recently happened to Russia.
Their solution is to start a new currency union big enough to offer a diverse range of goods and services (and eventually bonds) that bypasses the dollar.
It won’t happen overnight and the new currency will face challenges, but the process is getting underway.
The implications of expanded BRICS membership actually go far beyond the currency union.
With the additions of Saudi Arabia, Iran and UAE, the BRICS have now effectively surrounded the Persian Gulf. With the addition of Egypt and Saudi Arabia, they now effectively control the Red Sea and the Suez Canal.
Meanwhile, the addition of Argentina gives BRICS control of the Straits of Magellan for transit from the Atlantic to the Pacific Oceans (good luck in the Drake Passage; I’ve been there. It’s a daunting body of water).
BRICS are moving closer to the dual visions of Halford Mackinder, the geopolitical theorist whose notion of the World Island and Heartland were both based in Asia — and to Alfred Mahan, the naval strategist whose theory of sea power emphasized control of critical straits and other sea chokepoints.
The BRICS are consolidating physical control of both the land and sea pivots of history.
Expanded BRICS membership also marks the beginning of the end of the petrodollar era. Membership of Saudi Arabia in the BRICS is a large step in that direction. This is why the admission of new members and the launch of a new currency cannot be viewed in isolation.
They are two parts of a common project. The expanded membership is precisely what makes the new currency more feasible.
This is all happening under the noses of U.S. policymakers who seem ignorant both of history and current events.
Currency Wars: The Making of the Next Global Crisis
by James Rickards August 28, 2012
https://www.amazon.com/Currency-Wars-Making-Global-Crisis/dp/B00DPNUVLC
How the worldwide currency war, already under way, will soon affect us all. The debasement of the dollar, bailouts in Greece and Ireland, and Chinese currency manipulation are unmistakable signs that we are experiencing the start of a new currency war. Fought as a series of competitive devaluations of one country's currency against others, currency wars are one of the most destructive and feared outcomes in international economics. Left unchecked, the new currency wars could lead to a crisis worse than the panic of 2008.Drawing on a mix of economic history, network science, and sociology, Currency Wars provides a rich understanding of the increasing threats to U.S. national security, from dollar devaluation to collapse in the European periphery, failed states in Africa, Chinese neomercantilism, Russian adventurism, and the current scramble for gold.James Rickards, an expert who has worked at the highest levels of both finance and national security, explains everything we need to know about this growing global standoff. He takes readers around the world and behind closed doors to explain complex financial and political currents with absorbing firsthand anecdotes.
Sold Out: How Broken Supply Chains, Surging Inflation, and Political Instability Will Sink the Global Economy
https://www.amazon.ca/Sold-Out-Inflation-Political-Instability/dp/0593542312
by James Rickards (Author) Dec 6 2022
From the man who predicted the worst economic crisis in US history comes Jim Rickards’ second prediction – the collapse of our global economy.
The supply chain crisis is coming to a head. Today, your favorite products are missing from store shelves, caught in supply chain limbo somewhere in the Pacific Ocean. But what does this supply chain disruption look like six months, or even three years, from now? While we hope that post-pandemic recovery will absolve these issues, the reality is that digital currency, meme stonks, and social media can’t solve the age-old problem of producing and moving physical goods across oceans and continents. According to Jim Rickards, consumer frustration is only the tip of a very large, menacing iceberg that threatens global economic collapse.
In Sold Out, Rickards shares his predictions for our post-pandemic future and outlines how consumers and business owners can get ahead of the collapse. You’ll learn how energy shortages in China – fueled by the trade war with Australia – are disrupting the steel market and forcing entire factories to shut down. You’ll also learn how rising inflation will ultimately lead to deflation in a few short years – as consumer spending eventually tanks due to higher taxes, excessive debt, and increased layoffs – and why such economic conditions will closely resemble the 1930s. Finally, Rickards will look at the future of money, including the erasure of the American dollar itself.
Our global economy faces unprecedented challenges in the next few months. But whether we sink or swim depends on how prepared we are – and what we do now to thwart the coming collapse.
Will Inflation Soon Turn to Deflation?
https://dailyreckoning.com/will-inflation-soon-turn-to-deflation/
BY JAMES RICKARDS JULY 6, 2023
Can you expect continued inflation — or a trend toward disinflation and possibly even deflation?
That’s probably the most important question in economics today.
This is more than a matter of competing narratives. The question goes to the heart of modern economics (the so-called Neo-Keynesian consensus) and the models used in economic forecasting.
In truth, it goes to the heart of economics generally and helps to explain why so many forecasts are so badly wrong.
The inflation narrative is straightforward. Inflation was gaining momentum from mid-2021 until it peaked at 40-year highs in June 2022. That peak was 9.1% inflation, a rate not seen since the early 1980s. At the same time unemployment was at lows of about 3.4%, a rate not seen since the late 1960s.
This combination of high inflation and low unemployment seemed to confirm the validity of the Phillips curve, which posits an inverse correlation between inflation and unemployment. When unemployment is low, inflation is high and vice versa.
The Case for Deflation
The deflation narrative, which includes disinflation, is also straightforward. By late 2021, the Federal Reserve became increasingly concerned about inflation and decided to act. The Fed began tightening monetary policy in early 2022, reducing the base money supply by not rolling over maturing mortgages and U.S. Treasury securities.
They tightened further with a policy of 10 straight interest rate hikes beginning last March and continuing until this May. (The Fed skipped a rate hike in June 2023 but is keeping the option to hike further on the table for now.) This took the Fed’s policy rate to 5.25%, one of the fastest increases of that magnitude in Fed history.
The Fed’s monetary tightening seemed to work. Inflation has dropped from 9.1% last June to 4.0% this May. That’s still well above the Fed’s target inflation rate of 2%, but it does represent significant progress toward that goal.
It seems all the Fed has to do is raise rates one more time, perhaps this month, and wait patiently and inflation will soon fall to the Fed’s target rate. If a mild recession and higher unemployment are the price of this success, then that’s a price Fed Chair Jay Powell is prepared to pay.
If this two-year inflation-deflation narrative seems too neat and tidy, it is.
The standard economic models and simple explanations break down in a number of places. In fact, the breakdown is so extensive it calls in question whether the Fed and mainstream economists have any idea what they’re doing.
The best evidence is that they don’t.
The Phillips Curve Is Junk Science
To begin, the Phillips curve says the falling inflation should have been accompanied by higher unemployment. That hasn’t happened. The unemployment rate rose in May to 3.7% from 3.4% the month before, but the current rate is still at levels not seen since the 1960s.
The March unemployment rate was 3.5% and February’s was 3.6%. The fact is the unemployment rate has not risen much at all even after 16 months of monetary tightening.
The 1930s were a period of high unemployment and low inflation. The 1960s were a period of low unemployment and low inflation. The late 1970s were a period of high unemployment and high inflation.
History and data show that there is no correlation between unemployment and inflation.
We have to look elsewhere for explanatory factors that have real predictive value. Likewise, recession has not turned up in the data despite Fed tightening. It has been 38 months since the end of the last recession. Average annual growth during that period has been 5.88%.
Growth for the first quarter of 2023 was 1.3%. Projected growth for the second quarter of 2023 is 2.1% according to the Federal Reserve Bank of Atlanta’s GDPNow forecast. These recent growth figures are weak, but they are not recessionary.
There are ample warning signs of recession including inverted yield curves and I expect a recession soon. But it’s not here yet.
If unemployment remains low, the economy continues to grow and stock indexes are in a bubble despite the Fed’s historic monetary tightening, this calls into question the Fed’s models as well as the mainstream Neo-Keynesian consensus.
What’s going on?
The first flaw in the model-based forecasts is the failure of analysts to distinguish between inflation that emerges from the supply side and that which emerges from the demand side. The difference is crucial from a forecasting perspective.
The Psychology of Consumer Behavior
The inflation of 2021–2023 was real but it was caused by supply chain bottlenecks and shortages of critical goods and industrial inputs. The supply chain disruptions were exacerbated by unprecedented economic and financial sanctions because of the war in Ukraine.
This kind of supply-side inflation tends to be self-negating. The high prices cause reduced demand, which in turn tends to lower prices. We’re seeing this every day starting at the gas pump where the record high prices of the summer of 2022 have come down significantly (although still higher than 2021).
We see further evidence in OPEC’s decision to cut oil output as a way to prop up prices. In short, the inflation was real, but it’s already fading for reasons that have nothing to do with the Fed.
The second flaw in the models is the failure to understand the process by which inflation can shift from the supply side to the demand side if inflation persists long enough. This is a change in the psychology of consumers and plays out in behavioral responses. Neither the psychology nor the behavior is accounted for by standard models.
If inflationary psychology takes hold in the general public, it can feed on itself despite recession and declining real wages. The models don’t show this but history does. This is exactly what happened in the 1970s.
Inflation Can Be a Stubborn Thing
The inflation then began from the supply side with the Arab oil embargo of 1973 after the Yom Kippur War. The U.S. suffered a severe recession from 1973–1975 with peak unemployment of 9.0%. The U.S. had another recession in 1980, and a third in 1981–1982 in which unemployment hit 10.8%. That last recession was the most severe at the time since the Great Depression.
Despite three recessions in nine years, double-digit unemployment and two stock market crashes, the mid-to-late 1970s and early 1980s witnessed the highest inflation since the end of World War II. By 1981, inflation had reached 15% and interest rates were raised to 20% to combat the inflation.
The term for this combination of low growth and high inflation was “stagflation.” The inflation that began on the supply side in 1973 had moved to the demand side by 1977 and was out of control. Recessions couldn’t stop it.
Even in periods of economic stress, consumers respond to inflation in ways that make sense. They accelerate purchases because they expect prices to rise further. They use leverage to buy hard assets and stocks because they see these as safe havens against inflation.
Retailers raise prices to meet higher wage costs and to maintain margins. The entire process feeds on itself. And this self-help can continue even in recessionary conditions as it did in 1975 and 1981.
Stagflation has already emerged in the U.K. CPI inflation in the U.K. is 8.7%. At the same time, the U.K. is bordering on a recession with growth of 0.1% in Q4 22 and Q1 23, and forecast growth turns negative after that. Stagflation is not just an historical outlier. It’s a present-day reality.
Are we at that point? Are we in a world where human nature dictates inflationary defense tactics that feed on themselves despite possible recession and monetary tightening?
We’re seeing some evidence of this, including a new five-year contract for unionized teachers in New York City that offers back pay and signing bonuses and raises wages by 20%.
There’s no need to debate whether teachers deserve this raise. The plain fact is they got it. And there are many similar examples. How long before the pay raises to teachers and others get pushed into more consumer demand and higher retail prices that inflate away the wage gains.
The economy could party like it’s 1979.
Use the Barbell Strategy to Combat the Inflation/Deflation Tug-of-War
The odds of a recession and stock market decline are high. Still, the odds of persistent inflation and high interest rates are also high. Those two phenomena are not inconsistent despite what the standard models say.
We’ve seen them go together before in the late 1970s and in prior episodes.
We could be witnessing a case of inflation and interest rates higher for longer than Wall Street and the Fed expected. (By the way, if you’re interested in a much more in-depth analysis of this inflation-deflation conundrum, please see Chapters 4 and 5 of my most recent book Sold Out.
Given the uncertainties of the inflation/deflation struggle, the best approach for investors is a diversified barbell strategy that protects against both.
A model portfolio could have gold, natural resources and energy stocks as inflation hedges, with Treasury notes as deflation hedges, and a healthy allocation to cash between the two ends of the barbell to provide liquidity and optionality as conditions become more clear.
I’ll continue to follow these developments and keep readers informed. Stay tuned.
