Trade and financial sanctions are a double-edged sword. It’s possible to cut off Russia from imports of needed goods and services. It is also possible to exclude Russia from financial systems and payment channels. But trade and finance are a two-way street.
Getting back to normal probably won’t happen. Too much of our economy now depends on very abnormal interest rates. As real rates go up, businesses, households, and the federal government will be unable to refinance. They will go broke, default, or, in the case of the feds, print more money.
In today’s Money Morning, I’ll look at a huge signal from late last week and why it means things could get nasty in the short term. However, understanding the possible reaction to this worsening situation could actually be a big opportunity in a very specific industry.
US inflation came in a tad higher than expected this week. Which absolutely hammered markets in the US. Europe is in for a miserable winter of inflation too. And Australia is far from immune.
The eternal optimism of the markets is slowly being worn down, and we are approaching a time when the ‘buy the dippers’ may turn into the ‘get me the hell outers’.
The Fed is expected to raise its key rate by 75 basis points (0.75%) at its meeting next week, putting more pressure on debtors. Some people are urging the Fed to go easy, fearing — correctly — that they might drive the economy into a deeper recession.
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