Skip to comments.Hedge Fund CIO: The Golden Era For Central Banking Is Ending And A Global “Great Famine” Is Coming
Posted on 03/13/2022 6:17:09 PM PDT by blam
Defending freedom is going to cost,” declared President Biden, announcing an import ban on Russian oil. And no doubt our Commander-in-Chief is right. Everything we do comes at a cost. The goal in peacetime, of course, is to engage in activities where the beneficial returns exceed the price of our inputs.
War is no such pursuit. Everyone loses. The victors simply suffer less than the vanquished. In Europe’s last major conflict, the Allies defeated Germany. Russia’s victory cost it 20-40 million lives and economic devastation, a cost indelibly etched into Russia’s psyche.
War forces us to determine what we are willing to pay for the things we most value. Afghanistan’s puppet regime was unwilling to pay a penny when attacked by the Taliban. Putin expected the Ukrainians to be similarly stingy. His gross miscalculation has raised costs of this conflict, drawing us all into Europe’s latest senseless war.
And so, the search has begun for what each nation is willing to pay. The costs will be wide ranging and have started with energy.
“Europe consumes about 500bln cubic meters of gas per year. Russia provides 40% of that. Europe consumes about 500mm tons of oil, and Russia supplies around 30% of it, that is 150mm tons, and 80mm tons of petrochemicals on top of that,” explained Putin’s deputy prime minister, threatening to halt European exports.
“It is obvious that foregoing Russian oil will have catastrophic consequences for the world market. The price surge will be unpredictable, up to $300 per barrel, or even more,” he added, sowing uncertainty, trying to frighten his adversaries.
“In this case European politicians should level with their citizens and consumers about what they will face, about how the cost of petrol, electricity and heating will skyrocket,” continued Putin’s deputy prime minister. “If you want to cut off supplies of energy resources from Russia, go ahead, we are ready for that. We know where we will reroute these volumes. The question is – who benefits? And what is the point?”
* * *
Golden Eras: “The coronavirus pandemic will mark the dividing line between the deflationary forces of the last 30-40yrs and the resurgent inflation of the next two decades,” said economist Charles Goodhart, author of The Great Demographic Reversal. He sees inflation in developed economies settling in at 3-4% by the end of 2022 and remaining elevated for years. The addition of hundreds of millions of inexpensive Chinese and Eastern European workers, together with Western baby boomers and women led to a doubling of the workforce supplying advanced economies from 1991-2018.
Golden Eras II: The working-age population is shrinking across developed economies (in China by 100mm in the next 15yrs). Businesses will manufacture and invest more locally, re-designing supply chains. Global savings fall as older people consume more than they produce — spending particularly on healthcare. US manufacturing wages are less than 4x those in China (versus 26x when China joined the WTO in 2001). With global debt at record levels and asset prices elevated, Goodhart expects central bankers will struggle to tame inflation without causing a deep recession. “A golden era for central banking is ending, life will become a lot harder.”
Squiggles: “I posted the wage growth tracker yesterday without enough explanation,” wrote Lindsay Politi, One River’s Head of Inflation Strategies.
“I think the parallels to the early 1970s should be becoming very uncomfortable to policy makers,” continued Lindsay to our trading team on the One River internal market chat. “With the way core inflation is following headline higher with almost a perfect correlation and a lag is a relationship we haven’t seen since the 1970s and 80s,” she wrote.
Reap: Ukraine is the world’s 5th largest wheat exporter, accounting for 7% of global sales (in 2019). 71% of the nation is land is agricultural. It has 25% of the globe’s “black soil”,” which is amongst the most fertile. And still, in 1932, the nation suffered the Holodomor (Great Famine), as Stalin confiscated and collectivized farms. Today, and unsurprisingly, Ukraine announced a food export ban until the conflict ends. Russia is earth’s largest wheat exporter, accounting for 18% of global sales. So Russia and Ukraine account for 25% of global wheat sales. Prices are near record highs.
Sow: Russia’s Minister of Industry and Trade announced his nation is suspending fertilizer exports. The market is already in short supply, prices have surged. Russia is the globe’s largest fertilizer exporter, accounting for 18% of the potash market in 2017, 20% of ammonia exports and 15% of Urea. Putin said the fertilizer export ban is a move to ensure stable domestic food prices. He mentioned that fertilizer markets are deteriorating, making food a lot more expensive, and added that Russia has agreements with “friendly countries” on fertilizers.
Everything is connected, one moment naturally following another. And so it is tempting to think that by retracing each step we can explain why we have arrived at a particular place. Perhaps this is sometimes true, over very short periods at least. But the world is infinitely complex, and the truth is that we often arrive at a destination for reasons we can’t possibly understand, let alone have predicted. That doesn’t stop us from trying. We spin compelling tales that appear so obviously true that we come to accept them as fact. In a Feb 15 video that is making the rounds [click here], Professor John Mearsheimer explains why the West and Russia are clashing in Ukraine, even as he failed to foresee an actual war.
Vladimir Putin’s Feb 25 public address [click here], that was a precursor to the invasion, presents his story of what led us here. Like all such tales, both are presented so as to appear logical, linear, evident, inevitable, and their authors might even believe they explain the path properly. If only it were so simple, we might stand a chance to avoid the collisions that litter history. Who knows, perhaps the issue is that we seek conflict for reasons we’ll never quite understand.
But at any rate, it appears Europe’s latest conflict was unlikely to have occurred were it not for the inflation that has taken hold across the globe. Russia, after all, has a small and failing economy. It is poorly positioned to exert outsized influence but for its ability to exacerbate global energy, food, and metal price inflation. This, in turn, can inflict horrible damage on Western economies during a time when their central banks have few tools to tame inflation other than to crash their economies. It can also divide the world between rich nations and the hungry/poor. And exactly why we got to such a fragile state is itself a story we may want to tell ourselves we understand, but we will never fully know.
If it’s ending, it’s because the central bankers didn’t reinvest in their economies. They removed too much wealth for themselves.
Cue the Black Horse.
A lot of Green New Deal policies and politics, both in Europe and the USA, are part of the problem here as well.
...A Global “Great Famine”...
More like bad global malnutrition a la N. Korea.
People will be forced to become skinnier.
Famines are the result of government policy - it is impossible for an agricultural power like the USA to suffer one unless it is through intentional mismanagement.
People will be forced to become skinnier.
But they won’t see it that way.
So true. Food may cost a lot more but it will ve available. Instead of buying a new iPhone for $1200, theyll buy food.
Of course not. Real malnutrition lead to bad health. Prone to disease, shortened life span to name a couple.
Mild malnutrition may be OK.
Who owns the farmland in the USA? Do you think the devoted eugenicist Bill Gates is interested in planting food? Do you think the CCP is interested in sending those pork items that were outsourced to them to process back to us?
In the long term you are correct. We will adjust and domesticate our food production like it always should have been.
In the short term there are going to be very bad shortages.
God just give me this one last deal and then I will get out and start a monestary. Just let this Ukraine deal hit pay dirt and I’m done. Really God. Just one last roll of the dice. It’s all set up. We’ve paid off half the western world to support this. It was good to go. We were about to sneak Ukraine into NATO, close the deal and smack the bear across the snout, and now this. Please God, I pray you. Stand up for right and fairness. It’s the democratic free market way.
"Cutting calories from the diets of many animals dramatically increases their life span, leading some people to try to extend their own lives in the same way."
The current inflationary effect is the result of a tightening of supply chain controls for reasons that don’t make economic sense. Inventories of retail and durable goods is actually increasing at the same time that the M2 velocity (turnover of dollars) is at historic lows. This is a clear indication that people are not spending cash to beat perceived price increases as is typical of normal inflationary periods, they are simply sitting on cash because they either can’t or won’t pay for goods at inflated prices.
The exceptions are necessities like rent, food, and energy that are inelastic and ultimately tied to government contrived constraints like excessive property regulations, various wasteful taxes, and cult policies regarding climate change.
There’s nothing wrong with the economy that couldn’t be remedied by increased drilling and reduced regulation of shale oil fracking, accelerated programs to build new SMR and molten salt nuclear technology, simplified building permitting and land use regulation, and sensible water allocation in areas like the central valley of California.
As Reagan said, “Government is not the solution to problems, it is the problem.”
There is a big difference between bad malnutrition and a reduction in calories. Our population could use a reduction in calories.
Perhaps I did not make myself clear. I am talking about malnutrition of N. Korean scale or those people you see in bad African drought. It will lead to a host of health problem, including shortened lifespan.
My understanding of famine is that many people actually die of starvation.
Yes there are north koreans who had enough calories but died from malnutrition. Supposedly a lot of the people who died this way were holding on by eating corn, which has calories but is very low in nutrients. The ones who had access to rice, even some rice, were much more likely to survive
The CIO’s job is to manage information systems. Something seems off with this one.
In the past century-plus, Western “civilized” society has gone from nutrient-dense, low-calorie meals to nutrient-spare, high-calorie meals. That has combined with an increasingly sedentary lifestyle to prevent those “empty calories” from being efficiently burned in immediate physical activity; unburned carbohydrates are then instead stored as body fat.
In addition, foods have become less fresh, more processed, and increasingly polluted with artificial additives (often unnatural chemicals). Many are suffering from malnutrition even while eating generous meals. I was one:
Despite never having gone hungry, never having been drunk - much less drugged - and never having smoked, I nearly died from malnutrition in my early thirties. My body was unable to digest and assimilate nutrition even from the poor foods I was eating.
For the record (read: for the skeptics who still think that medical doctors actually know much about diet and nutrition), I was medically diagnosed with protein deficiency and pernicious anemia, despite being on a high-protein diet with foods containing B12.
The prescriptions I was given subjected my already-burdened body to agony; I stopped taking them after 3 days. Three weeks later, I collapsed. At the end of my ensuing five-week ordeal, I weighed 126 lbs. (I had lost about 50 lbs.)
After the crisis passed, I began a long study of diet and nutrition. I thereafter avoided ALL allopathic medical practitioners (although I would go to one for first aid if I suffered a traumatic injury), and am far healthier than I ever was when I listened to the same sort of “experts” who have been aggressively pushing experimental Messenger-RiboNucleic-Acid injections the past two years.
Hippocrates - who was natural and holistic in philosophy - would never be allowed a medical license in the USA today, which has suffered under medical tyranny from Big Pharma (via fascistic complicity from USDA, FDA, CDC, NIH... and NGO AMA) since 1910, discourtesy of John Rockefeller and and his paid NON-doctor, Abraham Flexner.
I was once a Biology major (with academic awards in all the physical sciences), and was once on the pre-med path. I emphatically opine that most so-called doctors are not physicians, much less healers. They are merely technicians (read: mechanics), and their knowledge is restricted by Big Pharma (who builds the curricula, and bribes the officials) to the Cut-Burn-and-Drug paradigm.
If you want just one valuable addition to any diet, I recommend Drumstick Tree [Moringa oleifera]. Water Thyme [Hydrilla verticillata] is another excellent candidate. Certain of the Brown Seaweeds (actually macro-algae, not plants) would add in Iodine, in which most Americans are deficient.
Translating the headline: If I can’t have MY war, you’re going to have to pay me beeg money!
The Biden administration made a big mistake in cutting domestic energy production. That said, the Europeans made an absolutely colossal mistake (the Germans in particular) allowing themselves to become so dependent on a single source for their energy. Now the Russians have them by the balls and can make them suffer greatly simply by turning off the taps.
The Poles were very smart to build a big new LNG terminal and sign a long term contract for more US natural gas. The French were smart to build a lot of nuclear power plants and get a lot of their energy from them. The western Europeans in general and the Germans in particular are going to have to choose between Gaia worship and national security/the domestic economy.
They also need to get that pipeline Trump proposed from the middle east through the Med and up through Italy built and running ASAP.
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