Economics

Stephen Miran’s economics will be tested by the forthcoming energy shock. Demand destruction could overwhelm the initial inflationary pulse.

Every market regime is different. We currently find ourselves faced with a strong and resilient US economy, historic equity prices, historic market participation, equity multiples we haven’t seen since the dot-com era, an inevitable global energy shock, a new level of energy independence in the Americas and a government that has too much debt to significantly raise interest rates to fight a stagflation scenario.

Like the Beverly Hillbillies, humanity spent millennia poking at the dirt with sticks until we accidentally punctured the crust and found a concentrated liquid battery.

The patience of investors who remained globally diversified and tilted to quantitative factors is being rewarded by a historic rotation.

The consumer credit crisis has created a lag in recession signals by temporarily inflating credit scores and spending power, masking underlying financial distress. Similar dynamics preceded the 2008 financial crisis, where easy credit defaults led to a sudden collapse of the bull market.

“Trees don’t grow to the sky,” they say. But there are substantial reasons to question whether the “new market” is like the old market, and redress its underlying mechanisms.

Will the underlying technologies of DeFi live up to the fervor and marketing hype, or will the technology inevitably be cast aside, a hollow shell of its ethos, living on in name only as its “brand power” is strategically co-opted by dominant interests?