I found Alfonso Peccatiello on Twitter not too long ago. He's a former head of a $20 billion investment portfolio who started his own substack to inform on financial matters and investment ideas. As of now, it's all free.
And, as I like to say, the more information you can consume, the better you'll be at making financial decisions that will benefit you.
The information he provides, while well-written and presented in a way that is easily digested, can be hard to follow if you don't have a mid to high-level understanding of economic principles.
Don't let that keep you from giving his stuff a read - or listen - though.
I'm linking his post, The Macro End Game, for a look at how he views our current global financial situation, and how it may play out.
This is definitely a topic of interest for me, and one I've written about for a while now considering the financial situation the U.S. has gotten itself into. And, his view is similar to mine as to how it all shakes out.
I just wish we had a more definitive map of what that end will actually look like.
Here's the intro portion of his article, The Macro End Game.
Hey everybody, welcome back to The Macro Compass!
What’s the Macro End Game?
In short, another great reset of our monetary system.
We often talk about what markets are going to do next month, or this year. We like the feeling of being in control of asset class performances: after all, achieving consistent alpha year after year is has remained an elusive task for many. Hence, we must try.
This obsession about short-term market performance puts investors at great risk of missing the forest for the trees - this article will zoom out and focus on the forest.
Specifically, we will cover:
How did we get here (our current monetary system)
The options ahead
The Macro End Game
Without further ado, let’s jump right in!
Cheap credit is cheap money from the future
In 1971, the Gold Standard effectively came to an end.
President Nixon ended the convertibility of USD into gold at a fixed price, and effectively introduced the fully elastic fiat system we have been living with since then.
That’s how it works: commercial banks and governments can now create credit out of thin air and add net worth to the private sector without having to worry about the intrinsic value of the newly created money - the peg to gold is gone.
For more insights on how commercial banks (via lending) and governments (via deficits) create money out of thin air, check out our evergreen article on this topic.
The main drivers of long-term economic growth peaked in the ‘80s, and politicians find it unpalatable to have the economy grow at a slower pace.
Especially when they are sitting on a monetary system that allows fully elastic credit creation: so, let’s leverage it up guys!
The main drivers of economic growth in the long run are working-age population growth and productivity growth: both peaked in the ‘80s.
Here is a 2000-years chart of the growth rate of world population.
I often find the comments at the end of any article to be informative as well, and this case is no exception. Give them a scan if you have the interest.
Global governments have been "kicking the can down the road" for quite some time now. The road's end may be approaching more quickly than most of us would hope.
And while I agree with Alf's options for preparing for the End Game, how realistic are they for the average citizen? Or at least at levels that will make a difference? And what does that mean for life going forward for large portions of the population?
Who knows, maybe conditions will remain manageable for the time all of us currently on the Earth are alive and we won't have to worry about what might result. Unfortunately, I don't have great hope that's the case.
What about you?
I found Alfonso Peccatiello on Twitter not too long ago. He's a former head of a $20 billion investment portfolio who started his own substack to inform on financial matters and investment ideas. As of now, it's all free.
And, as I like to say, the more information you can consume, the better you'll be at making financial decisions that will benefit you.
The information he provides, while well-written and presented in a way that is easily digested, can be hard to follow if you don't have a mid to high-level understanding of economic principles.
Don't let that keep you from giving his stuff a read - or listen - though.
I'm linking his post, The Macro End Game, for a look at how he views our current global financial situation, and how it may play out.
This is definitely a topic of interest for me, and one I've written about for a while now considering the financial situation the U.S. has gotten itself into. And, his view is similar to mine as to how it all shakes out.
I just wish we had a more definitive map of what that end will actually look like.
Here's the intro portion of his article, The Macro End Game.
Hey everybody, welcome back to The Macro Compass!
What’s the Macro End Game?
In short, another great reset of our monetary system.
We often talk about what markets are going to do next month, or this year. We like the feeling of being in control of asset class performances: after all, achieving consistent alpha year after year is has remained an elusive task for many. Hence, we must try.
This obsession about short-term market performance puts investors at great risk of missing the forest for the trees - this article will zoom out and focus on the forest.
Specifically, we will cover:
How did we get here (our current monetary system)
The options ahead
The Macro End Game
Without further ado, let’s jump right in!
Cheap credit is cheap money from the future
In 1971, the Gold Standard effectively came to an end.
President Nixon ended the convertibility of USD into gold at a fixed price, and effectively introduced the fully elastic fiat system we have been living with since then.
That’s how it works: commercial banks and governments can now create credit out of thin air and add net worth to the private sector without having to worry about the intrinsic value of the newly created money - the peg to gold is gone.
For more insights on how commercial banks (via lending) and governments (via deficits) create money out of thin air, check out our evergreen article on this topic.
The main drivers of long-term economic growth peaked in the ‘80s, and politicians find it unpalatable to have the economy grow at a slower pace.
Especially when they are sitting on a monetary system that allows fully elastic credit creation: so, let’s leverage it up guys!
The main drivers of economic growth in the long run are working-age population growth and productivity growth: both peaked in the ‘80s.
Here is a 2000-years chart of the growth rate of world population.
I often find the comments at the end of any article to be informative as well, and this case is no exception. Give them a scan if you have the interest.
Global governments have been "kicking the can down the road" for quite some time now. The road's end may be approaching more quickly than most of us would hope.
And while I agree with Alf's options for preparing for the End Game, how realistic are they for the average citizen? Or at least at levels that will make a difference? And what does that mean for life going forward for large portions of the population?
Who knows, maybe conditions will remain manageable for the time all of us currently on the Earth are alive and we won't have to worry about what might result. Unfortunately, I don't have great hope that's the case.
