Inflationary Lost Decade

Inflationary Lost Decade

An inflationary lost decade could be the road ahead which would be the most optimistic scenario

Geopolitics continues to steal the limelight, the latest being a recent surreal drone attack on the Kremlin with both leaders Putin and Zelensky on a mission to take each other out.

It was a high-level assassination that was the catalyst for starting WWI, and there is a sense that those at the peak of the human food chain are looking to start WW3. How many more red flags crossed before this goes nuclear? 

But let’s imagine war in Europe is a bad dream and go back to the friendlier era, August 2005, when the Kremlin thanked a British team for rescuing Russian submariners stranded on the seabed.

So the only thing to fret over is an inflationary lost decade.

Put another way, the Fed’s eleventh consecutive rate hike, the latest 25 basis points, taking the Fed fund rates to 5.25%, is likely to do little or nothing to tame inflation. In fact, it has created what could be the great financial crisis bank runs of 2023.

The mechanics of this were explained in a piece entitled; Bank Runs, dated March 2023.

“SVB is no isolated case, and could lead to contagion and other bank runs,” it was written in March.

Indeed, fast forward a few months, and you can count the bank failures on one hand, and soon you’ll need two because it was recently made public, that half of US banks are potentially insolvent. 

So an inflationary lost decade could be a deadhead unless you believe the mushroom cloud apocalypse scenario.

Inflation started rising in 2020 before the Fed raised rates

The Fed first raised rates two weeks after the Ukraine invasion and knows war is the worst inflationary aspect.

Inflation could continue into 2024 because the war in Europe necessitates money printing.

Let me spell this out, a little over one year and eleven Fed rate hikes have done nothing to stop inflation, 

The Fed actually wants inflation because that is how the empire finances spending through debts, and inflation reduces the burden of servicing those debts. “A decision on a pause was not made today,” said Fed chair Powell in his latest May FOMC meeting, where he said repeatedly that a pause would depend on the incoming data.  

So an inflationary lost decade could play out with entrenched inflation and continuous rate hikes.

The consolidation of the banking sector with smaller banks collapsing and being consumed by a handful of big banks is playing out.

The collapse of small businesses, the private sector at the expense of the big state and a handful of large corporations with privileged access to finance is also underway. 

Then there is unrestricted public spending, financed by inflating the currency away.

It is an inflationary lost decade with the centralization of wealth and power, with a large state and impoverished population beholden and easily controlled, which is what they want.