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Thursday, May 19, 2022 1:21:22 PM
By: Martin Armstrong | May 18, 2022
The liquidity crisis this time is COMPLICATED. This time we do not have the traditional speculative boom which has produced inflation. This time we have shortages and there is NO WAY a central bank can prevent this type of inflation by raising interest rates. If anything, it will only propel the shortages so we have the ironic situation that economic decline is unfolding into 2023, but the shortages will get worse causing even higher inflation ahead.
Hence, capital is retreating out of confusion creating a period of low tide. But the standard impact is DEFLATION but that means demand is declining relative to supply. Now we have a decline in supply because of the regulations and war. Consequently, prices will rise even in a recession because it is a shortage of supply, not a decline in demand. It is this lack of understanding that is creating the liquity crisis.
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