2023. Stagflation After Failed Stimulus.

After more than $20 trillion in stimulus plans since 2020, the economy is going into stagnation with elevated inflation. Global governments announced more than $12 trillion in stimulus measures in 2020 alone, and central banks bloated their balance sheet by $8 trillion.

The result was disappointing and with long-lasting negative effects. Weak recovery, record debt and elevated inflation. Of course, governments all over the world blamed the Ukraine invasion on the inexistent multiplier effect of the stimulus plans, but the excuse made no sense.

Commodity prices rose from February to June 2022 and have corrected since. Even considering the negative effect of rising commodity prices in developed economies, we must acknowledge that those are positives for emerging economies and, even with that boost, the disappointing recovery led to constant downgrades of estimates.

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In this episode, we discuss:

• How 2022 killed MMT
• Why buy gold
• The earnings recession risk
• Oil companies and the outlook for oil prices
• Banks and rising non-performing loans

If we look at the staggering decline of the cryptocurrency index in 2022, we may understand an uncomfortable truth. Cryptocurrencies were created as an alternative to the monetary insanity in the fiat currency world yet became a massive bet on the money expansion they were supposed to combat. Cryptocurrencies did not become uncorrelated assets, independent to the monetary policy cycle. Their market value was entirely dependent on monetary expansion.

The correlation between cryptocurrencies and non-profit tech stocks is enormous, but it is even clearer when we look at the impact of rate hikes and central bank balance sheet increase or contraction.

Cryptocurrencies should have benefitted from the rise in inflation and the destruction of purchasing power of currencies. However, their market value ended being a monster trade on central bank balance sheets rising.

The latest estimates from consensus for the main Latin American economies show a continent facing a lost decade. The region GDP growth has been downgraded yet again to a modest 1.1% for 2023, with rising inflation and weakening gross fixed investment. Considering that the region was already recovering at a slower pace than other emerging markets, the outlook is exceedingly worrying.

The poor growth and high inflation expectations are even worse when we consider that consensus estimates still consider a tailwind coming from rising commodity prices and more exports due to the China re-opening.