1 minute to macro clarity
Rinse repeat until we get the right answer
Medium reading time estimate says this will take you 2 minutes but I’m assuming you’re not that slow…
We have two paths ahead of us:
1) debt deflation depression
2) something else
We will choose 2 though clearly we don’t really know what it is. So far no country has been brave enough to articulate a truly durable alt strategy that negates 1. So it feels like data and proof point relentlessly to 1 and a lot of macro savants and big money people have asserted that based on ‘the irrefutable data’.
However, 1 cannot and will not be permitted. It may throw some shakes into the markets at points and some of you sages may profit from that…but know for your own safety you are playing the little waves not the tsunami.
This is all you need to know. Treat my inshite (Sean Connery voice) as a macro colouring book. Keep inside my lines and macro mother Gaia will praise you. If you wish to provide your own colouring in of the macro pieces them please feel free to do so in the comments.
Here’s my kick off suggestion:-
We’re in a world of enormous fiscal demands on governments. This will be met by a mix of traditional and MMT-ish approaches. Q: How do governments create the max multiplicative impact from their fiscal giving? A: They partially underwrite commercial lending by banks to small businesses (we’ve seen that during Covid crisis) alongside new industrial/societal policy. It would also help a great deal to reduce the risk weighting of pools of small business loans to less than inert (but loved) asset backed lending. ‘Free market’ US and UK are in a good place to do this.
There are large swathes of labour in near all western economies that is under-deployed and many places bereft of adequate ‘first world’ activity and infrastructure. We can find the need and the capital to deploy into these areas. Its an issue of will and recognition. Of course, free endeavours is the best route but given where we are a nudge from government is appropriate.
Growth is mainly a mundane quantity and not an innovative one. Why do we insist on suppressing the mundane part? Let the banks boom and stoke the growth-inflation engines!
WARNING: Most of you will not accept the profundity of my two step loop. Its very intellectually unwholesome for analytical market people so you will make up intellectualisations for why it can’t be. Wrong! Clearly, no debt deflation depression means we will have some mix of inflation and growth. We all know that inflation is impossible…but then so is riding a bike, until you do, and then its unforgettably easy and initially quite exhilarating and intoxicating….
