Ahead of Jacksonhole
As we prepare for the Jackson hole insights, it begs to understand liquidity; that played bigger part in the causes of inflation. One is getting more than bargained for. Japan vigorously fought decades for 2% inflation, instead they now, stare close to 3% all thanks to global liquidity. Liquidity, single most important factor of inflation as well as the cost of inflation that goes into the valuation matric of various asset classes. The universal fight slowly and surely is inflation aka impacting the liquidity. In the words of RBI Governor it is “unacceptably high”.
The word liquidity instantly brings water or its derivative to one’s mind. Curiosity drives one to understand how the water existed in the first place. The earth history is devoid of oxygen in its first half. The ongoing debate on when the water existed on earth is still not dated and roughly believed to be around 2.4 billion years; indicating the Great Oxidation Event (Source Livescience). It is almost certainly due to cyanobacteria which led to the Oxidation and thus leading to water. It is surprising then, we attempt to consume bacteria free water!. Is it a sheer coincidence that bacteria created water then; now adding further post the Covid in financial markets.
Another interesting aspect of water is, it travels wildly through cosmos, animals, you and me dead or alive. It is energy and is always constant. It is always subject of how to harness and store. Some term “water” as Gas. It is a weird chemical, that hardens when heated and cooled. Stays at the top of surface when frozen (Source BBC). Next time when you consume water, remember it previously travelled an unknown bodies (can be even aliens) and destination. No wonder we have the “holy water” and one will admit and understand its significance when seen in the right perspective.
The Holy water Ganga, is the sweat of Lord Vishnu, collected by Bramha. It flows through Lord Shiva after the prayers of King Baghiradh almost for 1000 years to release his ancestors souls (Source Srimad Bhagavatam). It is synonymous, when someone attempts to achieve the impossible to call as Baghiradh trials. Are we in that phase in term of fighting the inflation!
The financial community is equally divided; both in social media and in main stream discussions. Various analogies have been drawn, conclusions of various paths are narrated and shared to the maximum to test the response. This time the list of audience includes various Central Bankers. While the master himself is looking for clues and his team reminds round the clock on achieving the goal of inflation target at the cost of everything else. The longer the path to this road, the greater the panic. It is getting entrenched in sticky places and is not going away in a hurry. A casual look at Dow and Dax both below 200 DMA suggests the further lows are not out of the reckoning. UK100 above 200 DMA but looks tired with each piece of negative news. Comes to our own markets, though we look better, one has to remind we are not alone in this fight on inflation. They need to remind themselves, liquidity that is aiding has already travelled various forms. Probably Central Bank’s will have to do a measured Saint Jahnu who swallows the Ganga only to release through his ears. Now does that catch any one’s ears?