What Comes Next?

(My readers to me)

 

I've got it, already:

  • You made these predictions and, so far, so good.

  • There is an energy crisis on its way.

  • There is a food crisis on its way.

 

What have you done for me, lately?

(Me)

Here is a summary of how I see the short-term playbook running over a period of several years:

  • Politics continues to be counterproductive. Democrats push a climate change agenda while states like California send "free" money to people in the midst of inflation. No one is addressing real, pressing problems. (Climate change is real, but unfortunately, in the short term, other challenges are more pressing. Recall my, first you survive, theme from last week. Climate change must be managed in the context of an energy emergency, ironically significantly caused by misguided efforts to address climate change. We have both an energy emergency and a climate emergency (and a debt and entitlements emergency.)

  • The Fed continues to increase interest rates until something breaks in an attempt to slow inflation through demand destruction.

  • I see signs that the economy is deteriorating rapidly. Lacy Hunt notes that bank deposit growth is decelerating at a pace unseen since the Great Depression. Demand for money is weak and banks are having difficulty pricing all their costs.

  • Then, the Fed returns to stimulus. Politics will not allow the Fed to send the economy into a depression, although they may not be able to prevent it, and, overall, in the long term, it might be the right thing to do. Actually, the right thing to do would be for the Fed to just get the hell out of the way, but the likely result of that is depression, so that won't happen.

  • Inflation accelerates. It will not have been killed, and is, in any event, necessary to create erosion of our unsustainable debt.

  • Political pressure increases to "do something." You recall that I call politicians' need to do something / voters' demand that politicians do something the most destructive force on the planet.

  • Price controls and capital controls are implemented to make sure nasty corporations do not make too much money and to make you feel better when you buy something, if you can find it.

  • This creates more severe supply imbalances.

  • Rationing, beginning with specific goods and probably energy, is implemented.

  • War becomes increasingly likely. There is no politically acceptable way to fix all of this, so we wrap it all into a national emergency and blow it up. Rationing and price controls are deemed acceptable in a national emergency.

If you see echoes of the Great Depression / World War II period, so do I.

But history only rhymes, so what I am looking for are deviations from the playbook that create rhymes and not repetition. We are in early days at the moment, and things are aligning perfectly with the playbook.

That will change.