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The Alchemist explores the mysteries of hedge fund management further. This week's deep dive sees him wearing a suit! Can he cut it? The Acid Capitalist had a rough night but he's taken a magic pill to restore his superpowers and he eventually finds his mojo. This week we review central bank rate hikes. Surely, its the end, not the beginning? Private providers of credit have been raising rates since the summer of 2020. The US economy contracted last quarter. Official economic data is heavily revised in later years. Did the British economy relapse into recession last year? Just why are they insistent on more rate hikes? The Acid Capitalist is afraid, very afraid that equity markets might need to reverse all of their post covid glory.
But rather than accentuate the negative, he wants to offer guidelines and solutions. He believes that they should plead a mea culpa, their primary responsibility rests with preserving asset prices. Only by revealing that they're essentially custodian officers charged with preserving the collateral that underpins the huge debt mountain will we move forward. Better yet, they should move to enfranchise those citizens that have no assets. They should create a sovereign wealth fund. QE has only prolonged the depression. Better to impose a withholding tax on mercantilist nations that choose to park their trade bounty in treasury markets. These countries forsake endogenous domestic growth in favour of chasing exports. They perceive this as a more robust economic plan. But the world of international trade is the business of robbing Peter to pay Paul.
To enact their cunning strategy, global savings must rise. In China, savings rise because their currency is set too low, preserving a comparative trade advantage that market capitalism would otherwise bid away. Without their state interventions their currency would rise to bring the world into balance. Chinese households' incomes would reset higher and they might reasonably consume more. This does not happen. Instead savings rise; the share of consumption to gdp is remarkably low for such an advanced state.
The same applies elsewhere. With their comparative advantage, their lower relative
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