Zoltan Pozsar: 'Volcker was lucky'
"Expect Five Years of More Problematic inflation"
Housekeeping: This is the first half of the GoldFix Weekly post. The data and research parts will be out Sunday. Enjoy.
[UPDATE 9:54a.m.: Zoltan inadvertently lays out why Powell will likely pivot. Follow the logic if you will
FACT: Pozsar states Powell will keep on hiking but then goes on to enumerate the various immense global political pressures against it.
FACT: We also know Burns was influenced by Nixon/Carter (he admitted as much). And Volcker was enabled by Reagan. Without Reagan's go ahead, Volcker would not have been able to stay that course
THEREFORE: Why should we assume Powell wont cave to Biden?
If history is a guide, Powell will cave to political pressure as hard as he may try to not do it- VBL]
Zoltan Pozsar: ‘Volcker was lucky’
Summary
Inflation will be here 5 more years.
Volcker had Reagan, Powell has Biden.
Powell has inflationary headwinds. Volcker didn’t.
What will end the recession (that we aren’t in)
Energy will be nationalized
Sections:
Intro/ Overview
Powell Will Keep Raising
Inflationary Headwinds
Biden is Not Reagan
The Return of Big Labor
Energy Headwinds From ESG
“Expect Five Years More inflation”
YCC is Coming
What Ends Recession.
“Nationalizing Resources”
Zoltan’s End Comment
1- Intro/ Overview
‘Volcker was lucky.’ That is the subtitle of the section in the latest Grant’s Interest Rate Observer devoted to Zoltan Pozsar’s most recent public appearance. It is also how Zoltan described Volcker’s success in context of the situation back then.
Several things were notable in what Grant shared with readers from the Fed plumber’s visit with the Grant’s crowd. First, Pozsar seems to be more succinct when not writing a CS missive1. This is a relief for us and we suspect others who read those posts. As excellent as they are, trying to understand some things are a labor of love.
The other notable is he put a real time-horizon on inflation and was more specific on his previous conceptual prognostications.
Last, his play-by-play confirms (much to our delight and chagrin) , what we’ve ranted on about (secular stagflation, mercantilism, and monetary changes) since Goldfix began translating our second favorite Hungarian’s2 work since Goldfix began reading our second favorite Hungarian’s2 work via ZH.
So lets get to the meat of it.
2- Powell will Keep Raising
The article starts off with Pozsar’s assertion that Powell will continue to raise rates:
No doubt Jay Powell will continue to lift the funds rate. Having vowed to walk in the anti-inflationary footsteps of Paul A. Volcker, how could he not?
Unsaid but obvious to us: This is contingent on nothing breaking that Janet Yellen cannot repair with fiscal action or Powell himself cannot pinpoint and rescue behind the scenes quietly.
The reason in part is headwinds make it so the inflation must work it’s way through the system this time, like poison through a patient.