The current wave of global conflict and deglobalization is a direct consequence of a multi-decade populist trend. As younger generations demand fairer economic outcomes ('median outcomes'), governments are forced into protectionist policies, which inevitably create international friction and competition for resources.
By prioritizing resource acquisition in its own sphere of influence (Venezuela), the US has effectively signaled it cannot or will not defend Taiwan. This action, whether an explicit deal or not, acts as a 'handshake,' giving China the green light to pursue its own regional strategic objectives.
The Fed was designed for a supply-side economy. In the current populist era, structural inflation is driven by political demands for wealth redistribution and 'fairness.' The Fed's tools only benefit the wealthy and cannot address this core political issue, rendering it powerless, much like it was in the 1970s.
We are in a distinct global conflict that is economic, military, and strategic. Major world powers are actively competing for control of essential resources like precious metals and energy, shifting the economic landscape away from a normal cycle towards a long-term, secular trend of deglobalization and conflict.
The seemingly bizarre US rhetoric about Greenland is not a genuine territorial ambition. Instead, it is a calculated, strong-arm tactic designed to give European nations political cover to increase their own military spending and adopt a 'war footing,' aligning with US interests against China and its allies.
The extreme divergence in market returns between strong presidential years and weak midterm years from 1962-1982 was driven by populist political cycles. This pattern is re-emerging, as seen in 2022's sharp drop and 2024's strength, because the same underlying political forces are now at play.
The disconnect between strong GDP data and public dissatisfaction (the 'vibe-cession') is because wealth gains are concentrated at the top while median outcomes worsen. This K-shaped dynamic is politically unsustainable, forcing politicians away from supply-side policies and toward more populist, and often inflationary, measures.
A huge volume of corporate and personal debt was refinanced at near-zero rates in 2020-2021 with 5-7 year terms. With 50% of all debt rolling over in the next 3 years at much higher rates, a severe and unavoidable drag on economic liquidity is already baked into the system, regardless of future Fed actions.