Half A Decade Later, Here We Are Confused Again

These things are processes. They take time, a lot of time. Given that, I keep coming back to what might otherwise seem an absurd idea. The best-case scenario for all of us just might be a global crash, one that would make 2008 blush. At least then it might afford the world the benefit of unambiguousness. We almost got there ten years ago before it was interrupted by “give ‘em another chance to figure this out”; “them” being Economists and central bankers.

It is absolutely stunning just how much time has been wasted repeating ourselves, not that most people would know it. Here’s what I wrote half a decade ago in August 2013 during that particularly perplexing hot summer:

The US$ shortage has been a theme around here for most of 2013. To this point, it has been largely hidden in the shadows and vagaries of modern global finance, only hinted at through secondary and tertiary indications. Even then, like the gold selloff, the dollar shortage was ambiguous and cunning. From repo warnings and the dire state of collateral availability, to emerging market currencies it has been slowly building.

Replace “2013” with “2018”, would it be any less appropriate for today? What would eventually come out of that prior episode was the 2015-16 global downturn, the devastating “rising dollar.” It’s deflation, only not all at once. It comes at us in fits and starts, which compounds the problem. Every single time it gives way to reflation, all is lost. The urgency which had been building toward some real truth-seeking just disappears as the recovery fairy tale gets reimposed.

Human nature is our own worst enemy. Inertia is, without the benefit of perfect clarity, oftentimes insurmountable.

It was that way in 2013, too, as I was trying to point out. Underneath the forecasts for great things was an entire menu of not-so-great suggestions. That it took another year to more completely develop tells us something of this divorce. The “rising dollar” may not have broken out until the middle of 2014, but it was there all along – if you wanted to see it.