I'm no expert on geopolitics and outcomes are hard to predict, due to lack of information, making speculation tough, nor am I an expert on (global) markets (at least here I can say I put down some hours studying it)
But I have some food for thought I might as well pass on 1/
But I have some food for thought I might as well pass on 1/
2/ A thought I've seen floating around: "The war will cause Western CB's to pivot back on tightening"
I wonder if that makes sense, because:
A.) Tightening is required to curb inflation, because if you don't, disposable income keeps declining, economies don't like that
I wonder if that makes sense, because:
A.) Tightening is required to curb inflation, because if you don't, disposable income keeps declining, economies don't like that
B.) Geopolitical situation is driving essential commodity prices through the roof: wheat, oil, gas, you name it -> more inflation -> more decline in disposable income yadiyadiya 3/
C.) Printing the US dollar further to zero is going to do it no good as reserve currency status, considering/assuming demand for the dollar is already lessened (SWIFT & trade sanctions etc) and opponents of the West would like their own reserve currency alternative anyway 4/
5/ So what happens if you kick the can again - "to save the markets" - while inflation spirals out of control (no it was not transitory and no global trade disruption won't make it better)? The same as when you wouldn't kick the can, just later and more painful..
6/ With a country full of people who can't make ends meet whilst further artificially blowing up purchasing power by flooding an already broken system with more cash and weaker reserve status (during war?). No bueno for US, no bueno for Europe.
7/ The grain of salt is that I am making some assumptions here:
1. UKR<->RUS to not be an isolated event
2. Conflict to escalate with West involved (this is indirectly already the case but no explicit escalation yet)
3. Triggers NATO
4. UKR "wins", becomes extension of West
1. UKR<->RUS to not be an isolated event
2. Conflict to escalate with West involved (this is indirectly already the case but no explicit escalation yet)
3. Triggers NATO
4. UKR "wins", becomes extension of West
8/ Ukraine produces massive amounts of grain, holds massive gas reserves underground (no infra to retrieve it yet) and apparently produces gasses required in chip fabrication that are in short supply. Sounds like a pretty strategic place.
9/ Whether you believe (I don't) narratives that Russia wants Ukraine "because it is part of Russia" or that China wants Taiwan "because it is part of China", the fact is that if China takes Taiwan, they become globally dominant in the semiconductor industry..
10/ If you and your allies are dominant energy, semiconductor etc producers, you can price your products in your own currency:
"Tada: the war on reserve currency status"
The US has an interest in showing support and defending Taiwan and Ukraine because...? Yes
"Tada: the war on reserve currency status"
The US has an interest in showing support and defending Taiwan and Ukraine because...? Yes
11/ So assumption 5. would be that China will react at some point & Taiwan will become another conflict. (Tibetan Plateau also POI re water supplies)
The stats don't lie and each transition of power happened through, you guessed it, war
The stats don't lie and each transition of power happened through, you guessed it, war
12/ With all those assumptions, and let's be clear they are just speculative brain spins as if I am playing Colonist of Catan / Risk, there is more conflict ahead
Supply chains are basically payment chains in reverse..
Supply chains are basically payment chains in reverse..
13/ When they work, goods are in supply & everyone gets paid. When they don't work, well we have seen what happened with COVID.
With COVID, the assumption was that supply chain disruption would be temporary (as would be inflation)..
With COVID, the assumption was that supply chain disruption would be temporary (as would be inflation)..
14/ At this point, inflation proved not transitory when supply chains healed and we are facing more disruption of supply chains and the absurd amount of easing did not fix much (was the COVID response a policy error in hindsight?) and growth is back to zero
15/ More easing won't help much. It's a fast track to more problems. Markets are not going to like either option, but when doing nothing, how much longer until the FED loses any control? No idea, honestly.
Will policy makers see it that way? I don't know
Will policy makers see it that way? I don't know
16/ And then there is Bitcoin and Gold. If easing continues, inflation keeps going higher, they seem good bets as long as a recession / crash remains avoided. But if everything crashes, (almost) everything crashes and you buy the phoenixes that rise out of the ashes
17/ The other speculative bet, that seems to may have driven its rally in the past days, is Bitcoin as an alternative rail for unsanctioned trade (as did rally Chinese SWIFT alternatives). Even though this sure is where Bitcoin is heading in the future to some extend..
18/ I do downplay it as a catalyst for a major rally in the near future, with or without presence of conflict. Useful as a settlement layer to cross but I don't think much trade will take the risk to account in and hold. For now..
19/ The larger catalyst I could see in the near future (18-36 months) is "not your keys, not your money" as nations+banks hunt down other nations/invidivuals+banks for their assets (as is already happening) or more significantly: bail-ins (and then 18)
20/ Time to pay attention this week to hopefully make some sense of it. TA indicates we exit rangebound behaviour & start a new trend next few days (March 2nd - 6th window) in BTC, lasting in to early May before larger consolidation/reversal
21/ A good conclusion would be that times are hard and the seas are rough. Compass is foggy and in those times I think it's better to buy protection to keep the ship afloat rather than making it go faster, if you get the anology
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