Friday 27, May 2022

Rudy Havenstein

Rudy got kicked off Twitter, even though all he ever did was hurl hand grenades at the Fed and the US Treasury. I don’t think he’s always right, but he’s always interesting. His theory is that the Fed is the font and origin that’s all that’s bad in the US (and, to an extent, global) economy today. I prefer the nuanced view of someone like Bill Nelson of the Institute for Banking Policy, but Rudy is definitely the more amusing to follow. He’s now on substack. You can read his stuff here. He’s also on Reddit, but I am not sure he’ll keep going there.

China

Xi Jinping is the next Mao, and not in a good way. This leader explains how it’s all going to end in tears. A lot of people have been very bullish on China (noteably Gavekal), and I get it that the currency is undervalued, and if the balance of the activity is normalized, so that the country becomes service led, like the west, we might see a burst of activity. But the fundamental problem is that the country is run by a bunch of dictators who have no real economic incentives to grow the real economy and benefit the masses. Those in power have already squirrelled away their wealth in London, Zurich and the crown protectorates of the Carribean. Why would they bother fixing China’s economy?

Housing

The Global Financial Crisis was caused by a US house price crash. What I hadn’t really realized is that (probably) all of them were. I guess Hyman Minsky would not have been surprised. Banks get overconfident, extend too much credit. The biggest asset market is housing. Prices get pushed up above any meaningful value to occupiers. Prices crash. Governments giving guarantees to bank creditors (i.e. depositors) just pours petrol onto the flames.

I don’t really know what to make of this:

Defence is on the attack

The brutal truth is that the war in Ukraine is great news for defence contractors. This post points out that about $17B extra will be funneled to US defence contractors as a result of Biden’s new bill, which is nominally to help Ukraine win the war. Sadly, even in the most miserable catastrophes, someone is winning.