Charge from Behind

The spectre of global conflict exists against a backdrop of the most accommodative monetary policy ever. I know that every major central bank talks about rising inflation and their commitment to dealing with it, but almost every major central bank is still printing money. Let’s observe some charts that depict policy rates vs. official measures of inflation. “Official” measures of inflation can never completely represent the prices an ordinary citizen faces. I believe these are massaged statistics that paint the best possible picture. Real consumer price inflation is acutely worse. But even the official statistics are a complete disaster.

Inflation Narrative

Every asset class has an ever-shifting narrative around whether or not it will make a good hedge against inflation. Instinctively, many believe that as a scarce asset, Bitcoin and other cryptos are great inflation hedges. And over a multi-year time horizon, they are likely right. However, lately, Bitcoin has behaved in a more “risk-on / risk-off” fashion rather than an asset that always appreciates if real rates are negative.

Add a War

Let’s look at some possible scenarios that could occur if the current situation in Eastern Europe expands into a medium- or large-scale global conflict.

  1. Many countries decided to underinvest in the production of and exploration for hydrocarbons due to environmental concerns. That has led to society replacing cheap hydrocarbons with relatively expensive wind and solar (as measured by the energy each produces vs. the energy investment each requires). As a result, people are paying more for everything, because existing as a human in our current societal structure requires energy. Some might say the cost of hydrocarbons does not fully reflect their negative environmental externalities — but tell that to a family who now pays 50% more to heat their home during the dead of winter.
  2. The world printed the most money in human history over the last 50 years. Now that populations are getting older on average in all major economies, there will be less productive people to service an ever-growing mountain of debt. But to keep the game going, central banks must print money so that, on a nominal fiat basis, the old debt can be honoured. A government never voluntarily defaults on its obligations in its own currency — it uses inflation instead.
  3. Following past pandemics, inflation rises. Labour, which is scarcer, typically gains an upper hand over capital and demands a larger piece of the action. The post-COVID is no different. Costs are rising globally, as the productive workers who are left demand better wages and benefits. The robots aren’t ready yet, so companies still need all those “essential” workers.
  4. Central banks in the most developed economies need to raise rates substantially just to get to positive real rates. However, the nominal interest rate level at which the financial system is likely to collapse is at an all-time low. Some sectors of the financial and possibly real economy may implode if rates rise another 1% to 2% from current levels.


The global citizenry now possesses smartphones that fit inside their pocket, which are a tool of mass communication to share knowledge instantaneously. We can show each other the depravity and destruction war ravages upon our respective societies. Hopefully the knowledge of what bombs and bullets can do, in real time and in colour, tempers the collective from going along with wars put in front of them by the political elite.



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Arthur Hayes

Arthur Hayes

Co-Founder of 100x. Trading and crypto enthusiast. Focused on helping spread financial literacy and educate investors.