Geopolitical Interview: FED to shock markets in 1st half 2022

FS Insider interviewed macro economist Christian Takushi this Wednesday 12 January 2022 to discuss FED Policy and Interest Rates. Christian explains how markets are unprepared for what is coming. Misled, they are focusing on guessing the number of rate hikes – which is not really the issue in 2022.  Consensus thinks the FED has had a change of heart and it will hike rates 3-4 times during 2022.

Christian believes the FED is only deviating from its script temporarily, because of massive pressure from President Biden. Americans are furious about rising inflation and they are on track to hand over both the House and the Senate to Republicans this November. Thus, the FED has to shock markets within the next 6 months, not 12 months. The FED may allow interest rates to overshoot in the 1st half 2022 to achieve this! Christian expects a rate hike shock outside of the FED schedule.  What matters most in 2022 is the degree of surprise. 

After taming inflation the FED wants go back to stimulating the economy and printing money. Without excessive liquidity and stimulus Western economies will otherwise shrink – thus, inflation and negative growth would set in (stagflation). Both the FED and ECB are working together for years to create inflation, letting it run hot (by keeping interests near zero while inflation runs at 7%  .. “we will hike interests rates next year” , in order to then shock markets and somewhat deflate the greatest bubble of all times. 

https://bit.ly/3I6dlQC

Geopolitics: It is in this highly vulnerable economy our central banks have created that the enemies of the West could strike hard. OurCentral Bank policy is giving Russia, and China, (but also Turkey, North Korea and Iran) amazing opportunities to strike at the West or hurt the West’s interests – FED and ECB policies have become the biggest threat to our National Security.  

The convergence of FED/ECB policy and Russian/Chinese aggression is probably not so much the design of evil-intended elites, but rather a multi-decade process that many of us are part of. Even the money printing that so many scholars criticise has been enabled by the refusal of investors, corporations and consumers to accept corrections and pain (recessions). In 2009 investors rescinded their oversight role over fiscal finances, never to exercise it again. There are no more balance & checks, everyone is sitting in the same boat: Investors accept European 10 year bond yields of 0.7% instead of demanding 7% or more. When I set up this hypothesis and test it. things fall into place without having to force arguments or use any conspiracy theories.

• FED and ECB need high inflation and low interest rates until 2025 at least. Sustained Treasury yields of 5% or higher would leave the USA bankrupt and insolvent quickly. Talk about fighting inflation or tapering is only short term political necessity
• Printing money ushers runaway inflation (as we see among financial assets for 11 years), but zero interest rates usher deflation (it debilitates the real economy, ushers balance sheet shrinking)
• The main reason for the current high inflation is not Covid, but central banks. They have weakened the real economy for 12 years by massively disincentivizing (punishing) investments and promoting speculation.  Companies have not invested enough in real facilities over the past 12 years – thus, any disruption would end up in shortages and price hikes.
• After inflating financial assets and real estate for more than 20 yrs, some central banks are contemplating normalising (deflating) them

The interview in full length is a courtesy of FinancialSense.com

Macro Economist Christian Takushi was interviewed by FinancialSense.com’s senior editor Cris Sheridan. Takushi gives a balanced non-ideological analysis on world affairs. He sheds light on aspects that consensus is underestimating. 

By Christian Takushi MA UZH, Independent Macro Economist & Geopolitical Strategist. 15 Jan 2021

Independent Global Geopolitical Macroeconomic Research
Global Geopolitical Research GmbH ©

Disclaimer: None of our comments should be interpreted or construed as an investment recommendation

A distinct broad approach to geopolitical research

(a) All nations & groups advance their geostrategic interests with all the means at their disposal

(b) A balance between Western linear-logical and Oriental circular-historical-religious thinking is crucial given the rise of Oriental powers

(c) As a geopolitical analyst with an economic mindset Takushi does research with little regard for political ideology and conspiracy theories

(d) Independent time series data aggregation & propriety risk models

(e) Takushi only writes/comments when his analysis deviates from Consensus