The new week begins with the same propaganda as the old one ended. Mainstream media report on the central banks' attempt to curb inflation by raising interest rates. Nothing could be more misleading.
- to use the example of the ECB, we must note that for six years the European Central Bank has been the only institution to purchase sovereign bonds of Southern European countries. This process of crowding out the private capital market is highly inflationary. The temporary disinflationary phase we may have entered is therefore likely to be only temporary and is also the result of the destruction of aggregate demand by the liquidity in the markets and by the rise in interest rates.
- The fact that the Fed, of all people, is raising key interest rates in view of the gigantic debt levels in the U.S. is due to the attempt to dry up the euro-dollar market and thus gain a strategic advantage on the global financial markets.
3 The global illiquidity of the markets stems from the fact that the bond market has already completed the much-discussed tightening through massive sales of government bonds. It can therefore be assumed that equity markets and other risk assets will continue to deflate in the coming period. If the Fed's official pivot comes, it is statistically likely that equity markets in particular will continue to depreciate. So we are in for a longer drought period.
- what does this mean for us: I personally try to improve my liquidity position, to maintain cash flows, to hodle parts of my cash flow in bitcoins and to weather the coming storm on the capital markets and in the real economy as good as possible.
Best regards from Málaga and have a successful week!