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A THREAD on how I see (in/de)flation, who helped in shaping that view and how seemingly divergent narratives can be valid and coexist within a dynamic overall regime.
Jeff Snyder is one of the more informative figures in the debate, offering a CPI/Fed/Banking focus. His work is largely supportive of @JeffBooth's "Price of Tomorrow" thesis, exhaustively covering the illusory aspects of Fed "power". https://twitter.com/JeffSnider_AIP/status/1327350786385440775?s=20
Chris & Grant touch on the social implications of the "k-shape" split of real wage deflation & asset inflation here. Legacy asset market focus, helps understand how thesis of 2 Jeffs above interacts with observed asset inflation. https://twitter.com/ttmygh/status/1324265414826827776?s=20
@JeffBooth's @priceoftomorrow helps to explain the structural problems w/ state-directed inflationism in a tech-deflationary regime. The book lays out an original thesis on the dynamic relationship between policy & deflation. https://open.spotify.com/episode/3zvU9wLAWSpVK3kvT6mAfJ?si=L1oU8jsRRwuGfB__Ai1XNw
And despite being a fallen hero, @TraceMayer's credit contraction thesis worked extremely well in 2020. Capital burrowed through the liquidity pyramid, raising demand for islands of safety & triggering a flurry of repositioning.
http://www.creditcontraction.com/images/The-Great-Credit-Contraction-Sample.pdf
http://www.creditcontraction.com/images/The-Great-Credit-Contraction-Sample.pdf
All together, you get this strange mix of localized inflation, pooling of capital in housing, bonds, stonks, gold & #BTC 
amid a broader deflationary regime of lower real wages, declining purchasing power in most markets and lower living standards in the West.
amid a broader deflationary regime of lower real wages, declining purchasing power in most markets and lower living standards in the West.
The baseline in my view is the deflationary wage cycle where factor price equalization is very much ongoing & enhanced by tech "de-materialization." That some mature asset markets are able to disconnect & surge in this env. is testament to a fatal flaw of centralized money:
By hiding behind greater good arguments, CBs directly bail out over-levered, failing speculators in markets like MBS, CMBS, USTs, HY & IG. This sets the foundation upon which great speculations are built, removing the creative destruction that would otherwise *normalize* wealth.
And zooming out a bit, you can have a mild Weimar, slow moving social collapse in a marketplace where real wages go down 1-2% annually against fiat goods and 6-15% annually against quality foods, housing, bonds, education & medical care. That's the world I think we're in.
A year ago my view was that organic and vibrant global growth was highly unlikely & downside risk justified a defensive posture in USTs, gold & #BTC . Those three were already doing well before COVID, and ended up getting a major shot in the arm.
. Those three were already doing well before COVID, and ended up getting a major shot in the arm.
Best case fwd scenario is tepid growth & maintenance of the existing debt structures. Most likely case is unprecedented defaults & credit losses eroding confidence in 2020's "islands of safety" like RE, HY/IG, CMBS. That should trigger an ongoing rethink of safe havens globally.
Similar to late 2019, I think the idea of focusing on a "return of capital" instead of a "return on capital" is the prudent move. #BTC offers anomalously high returns on capital alongside a liability-free equity profile, a function of it moving from a nascent to a maturing asset.
offers anomalously high returns on capital alongside a liability-free equity profile, a function of it moving from a nascent to a maturing asset.
Just as the economic environment is simultaneously inflationary (assets) and deflationary (wages), capital storage in #BTC can simultaneously offer protection from dilution and an incredible, growth-oriented return profile.
can simultaneously offer protection from dilution and an incredible, growth-oriented return profile.
