The rally yesterday was triggered by a belief that the Bank of England was "restarting" QE while still raising rates.  The money flow into US assets (and out of there) was fast and furious, followed closely by a decent amount of flow out of the Euro and (somewhat less) Yen as well.

Don't bet on Pavlov's dog actually getting the steak.

Indeed if you got trapped in this downtrend you might think of it as a short-term reprieve that may go on for a little while.

But not for long.

Reality is that the stupidity of printing credit up to cover all ills is global in the Western World and also extends to China.  The unwind of that, which has to happen or we get a stagflationary recession far worse than the late 1970s, also has to happen.

It won't happen in a straight line and 20+ years of "training" people in the markets that when the first sneeze occurs central banks will be there to hand you a hanky is going to take quite some time to break.

But break it shall, and the sooner you recognize that the less you will lose.

In case you haven't noticed productivity has been in the tank.  Even the government admits it, but you see it everywhere.  Staff in stores that aren't doing much if anything at all, surly assistance, firms apologizing when you come in the door because they're "short-staffed" and similar.

Productivity is simple to define: It is doing more with less.

That's all.

It is, over the five or so thousand years of recorded human history, the single event that moves the common status of mankind forward.

But now, it has stopped.

What you often hear is "well, the government paid people to sit at home and drink beer" and, indeed, that did happen.  Remember who asked for and made that happen: A so-called "Red" President who was also the self-described "king of Debt."

Of course anyone who has ever put too much on the credit card knows how that turns out; the elation of that weekend in Vegas complete with plenty of booze, maybe some hookers and blow on top turns into serious pain when the bill comes.  It doesn't even have to be Vegas, of course; the local pub and hanging out with the homies works just as well to screw up your world if you put it all on the plastic and can't, when you get down to it, afford that.

Somehow we seem to think that this doesn't apply at a national scale.  One need only look at public opinion when it comes to Congress; everyone hates Congress except for their guy or gal, who they vote for once again because they bring home the credit from the government and spread it around.

How many of said people vote someone out when that's not funded by prior taxation?  Zero.  Ever.

How many of said people vote someone out when they sit back and allow things like NY and California to try to shut down the use of carbon-based fuels, upon which literally every advancement of human achievement over the years has been predicated upon?  Zero.  Ever.

How many of said people vote someone out of office because they will not put a stop to the scam of claiming something is "green" when in fact all that was done is shove the pollution overseas where the people are incapable of resisting, such as is the case with (in particular) lithium-based batteries?  Zero.  Ever.

How many of said people vote someone out of office because every single hospital and other medical institution has, through policies and acts that facially violate 100+ year old law, specifically 15 USC Chapter 1, and by doing so have taken medical expense from 3% of the economy to roughly 20% and, at the same time, have pushed and even tried to force acceptance of various procedures and drugs upon the population?  Zero.  Ever.

How many of said people understand that the entire medical industry is by definition parasitic; that is, it produces nothing and at best it can enable someone to economically produce where they otherwise could not, and that paying for acts rather than results is guaranteed to have a net negative outcome for society as a whole -- and thus this must be stopped and said elected representatives must be compelled to do so by, at minimum, loss of their job if they don't?  Zero.  Ever.

How many of said people understand that the entirety of the last 40 years when it comes to stock and other asset prices (e.g. houses) has been predicated on an always-declining interest-rate environment and thus the interest expense for a given amount of debt has continually trended lower.  Nothing, of course, can continue forever and that is no exception.  In other words this scheme was always going to end and now has, so no, you weren't "geniuses", you were exploiting an unnatural and in fact destructive set of circumstances for your short-term personal gain at the expense of your children and the nation's future?  Zero.  Ever.

Can what is an impending calamity be stopped?  Sure.

Will it hurt more to stop it now than it would have to stop in 2000, or in 2007?

You bet.

I've pointed that out several times over the roughly fifteen years I've penned this column; the longer you keep the distortion going the worse the economic pain is that you must undertake to resolve the problem.

Do recall that both "Blue" and "Red" sides of the aisle have continually refused to accept any of said facts.  Clinton, Bush, Obama, Trump and now Biden -- all the same in that regard.

What was a modest amount of pain in 2000, and a moderate amount of pain in 2007 is now very severe pain and yet if we try to deny arithmetic once again and engage in yet more schemes and scams instead of facing the facts that irrespective of whether you believe in climate change as a result of man or not we cannot have a viable modern society without carbon based fuels as its core simply on the laws of physics, and that Congress must not spend money it does not first tax we are going to continue to dig the hole deeper and deeper until we find ourselves with electric bills so high that we can't pay them and industry will shut down because they can't pay said bill either.

This, and only this, has made possible replacement of actual output with parasitic or even directly harmful acts to our modern way of life including alleged "advancements" that cannot work because they violate the laws of physics and/or mathematics.

Citizenship is not a spectator sport and if you refuse to discharge your responsibility as a citizen then very bad things can and are likely to happen.

The time for the appearance of capacity for such scams to "work" is over because it eventually had to be over.  If you do not recognize that inevitability you are claiming time has no value and thus people will not demand to be paid for said value of time.  Yet this is known false by every single human being on the planet from the point of first self-recognition of time by a young child.  The time I spent writing this column I can never get back no matter what I do.  The time you spend drinking a beer, working or watching a football game you can never get back either.  Every self-aware individual knows this from their earliest childhood.  Time always has had value and always will yet we've denied that for forty years as a matter of policy and trope.  It was always a lie and worse, we've refused to stop lying to ourselves and enabling others, along with ourselves, to exploit said lie for alleged "gains" because being honest about an immutable fact of existence means not having everything we want today.

I know you all like the basics of modern life -- a refrigerator, a stove, an an A/C unit, never mind convenient heat in the winter.

All of that can go away if you don't face facts.

One is maybe an accident.

Both, on the other hand?  No.

Now could there be seismic activity involved?  Well, if there had been.  But there wasn't.

My money is on sabotage but the question then becomes who has motive and capacity to pull it off?  It certainly wouldn't be Russia; while they're capable there's no motive.  They'd like to sell gas, of course, and can't without the pipes to deliver it.

This is truly a "black swan" sort of event, in that now its precluded for Europe and Russia to agree in some way to turn the pipes back on and deliver the gas over the upcoming winter.  Without a means of delivery it doesn't matter what you want to do; you simply can't do it.  And while I'm sure the damage can be repaired that's not a "few day" or "couple of weeks" problem in a circumstance like this.

Very bad things are likely inbound for Europe this winter, all on the basic fact that all modern civilization progress has come from carbon-based fuels.  I don't care if you like this or not; it's fact.  All the WEF-maven sorts fly around in planes fueled with..... carbon.  Equally-seriously modern agriculture is absolutely dependent on this, in particular natural gas which is the major feedstock for modern fertilizers, and European farming uses far more of them on a per-acre basis than we do in the US.  It's how they get their yields and without them, well...... yeah.

Never mind industry which, if forced to shut down cannot simply be turned back on.  Plants that run on a continuous basis frequently have "hot sections" that, if cooled, require weeks or months of refurbishment and a graduated restart procedure; it is not a "light switch" sort of operation.

Be careful thinking this is no big deal folks -- you're likely very wrong about that.

Folks, this is not The Fed, nor can The Fed stop raising rates until either (1) there is a nasty, deflationary recession which takes several trillion out of circulation (by destroying the mythical "value" it represented) or (2) Congress stops deficit spending.

Yes, I know, that would require a massive decrease in said spending or a huge (unlike anything seen before) increase in net federal taxation.

The latter can't happen and further this year's "capital gains" receipts are likely to be much lower for obvious reasons which of course will make overall federal tax receipts go down.  The former therefore will and eventually Congress will have to capitulate.

Is this a 2022 story?  No.  It might not be a 2023 story, but there is a hope for it to be a 2023 story.

That pivot may come off the election, assuming the GOP gets at least one house of Congress.

Indeed, what might actually make it even "better" is a split Congress, since then almost-literally nothing may get done, which means no more adds to the deficit spend and that would at least slow it down.

In the meantime, welcome to the mess.

Whether you're GOP or Democrat you all begged for and cheered it on starting with Trump and then continuing with Biden, so don't go point fingers.

Nothing forced that deficit spending during the pandemic; it was voluntary, and I know of verrry few people (I was one of them) who said it was stupid and would likely blow up in our face.

It did and now we get to pay for it.