“Central banks are not playing with fire. They are on fire! » Editorial by Charles SANNAT

My dear impertinents, dear impertinents,

After the rain, inevitably comes the good weather.

After the night, inevitably comes the day.

After winter will also come summer.

There are some things that are immutable.

The same is true for economic crises.

They never happen, I say NEVER by chance.

It is the central banks that decide on recession or growth.

How ?

Overall with the weapon of rates and more generally the monetary weapon.

Central banks open or close the tap on liquidity and therefore on the quantity of money in circulation in the world.

The greater the quantity of money, the higher the growth.

The more the quantity of money is reduced, the less the growth is strong.

Logic.

When central banks raise rates and stop buying assets, they take a lot of money out of the economy.

When you add to that the fact in the United States that the American government has just withdrawn (which is understandable) 2,200 billion dollars of covid aid paid to the population in 2020 and 2021 you have a lot, but then a lot of less money.

Finally, because that’s not all, with inflation at 8.5% and energy prices exploding, the drain is even greater in the economy and this reduces in a way that is as considerable as it is violent the power of household purchases and therefore the dynamics of the economy.

Central banks know very well what they are doing.

And what are they trying to do?

To curb inflation, to reduce the speculative bubbles that have developed on all assets, praying that this does not lead to the generalized insolvency of the system.

However, they take a huge risk to do so at the time of the war in Ukraine and when energy is at its peak, which reinforces the recessive effect of the rise in rates.

There is little chance that we will not be in recession this year.

Central banks decided to crush the economy.

They don’t play with fire.

They set fire to the economy.

This is therefore not the time to rush to buy bond or stock market type assets which will largely correct in the weeks and months to come.

There are other things to do to protect your wealth and make it as resilient as possible. I will tell you about it specifically in the special strategies file that I am writing for you for this month of May 2022.

It is already too late, but all is not lost.

Prepare yourselves !

Charles SANNAT

“Insolentiae” means “impertinence” in Latin
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