Notes From Underground: Staring Into the Abyss

To my readers —
My apologies for the long hiatus, but in addition to my sojourn to the East Coast, my eyesight has been suboptimal. That said, my mind has been ruminating on what has been a very active first half of the year between Russia’s invasion of Ukraine, the Fed’s aggressive path — in addition to other central banks exiting a stimulative framework. While I may not be writing at the moment, I’ve taken the time to record a couple of Financial Repression Authority podcasts. The first was with Spanish economist Daniel Lacalle. As always, I look forward to your questions, comments and concerns as we head into the second half of what’s already turning into a tumultuous 2022.
Click here to listen to the podcast. 

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21 Responses to “Notes From Underground: Staring Into the Abyss”

  1. Trader1 Says:


    How do you think the G-7 Ban of Russia gold plays out other then India or China buying it?? — Like being able to make deliveries on CME Contracts, LME Contracts???

  2. Trader1 Says:


    How will Lagarde be able to hold the EU together with inflation, rising interest rates, and spreads blowing out between countries?? — Are we at the ultimate test of Bernard Connolly’s Rotten Heart of Europe??

    • Yra Says:

      TRader 1—all great points –the Germans are going to be under suffer pressure both from energy and the continued financial repression of German savers,your points on gold deliveries is not slight matter as the rush to sanction is going to create all sorts of collateral problems for many precious metals investors and hedgers–but will the FRAGMENTATION strategy of President Lagarde cause the German High Court to reconsider the entire Lisbon/MAASTRICHT edifice—?will the markets as usual force the ECB into another liquidity crunch with interest rates at zero?

  3. Al Levy Says:

    Hope you are feeling well

  4. Joel Dethlefs Says:

    It seems the leadership in Europe are using AI to run their thinking as all of them together have no clue as to finances or economics. The EU keeps adding nations to financially suck them dry using freshly printed fiat debt. The payments are coming due, assets will taken, and dispersed to the 1%.

  5. Richard H Papp Says:


    I do not know who is older, you or i but i was born 25 Dec.1940 and i wish you improved health.
    Students of the Markets should study the Bear Market of 1937 and especially the plunge in Commodities in the Fall of 1937. Then there is the Top of 1966 in Equities and the recovery followed by 1974/1975
    Although patterns never exactly repeat a knowledge of History will be a great help in navigating what is ahead.

    • Yra Says:

      Richard you are older —and your thoughts appreciated and in studying 1937 you are retracing the work of Bernanke and the fears of bad policy in bringing on a new recession through FED rasing rates and Treasury pushing for tax increases—as Bernanke promised Milton Friedman at Milton’s 90 th B-day—we will not make that mistake again hence the massive amounts of QE to prevent a liquidation crsis

    • David Richards Says:

      I think the big difference between today and 1937 or 1966 is the higher level of indebtedness now. Very few countries can raise interest rates meaningfully anymore because with the debt loads they’ll quickly crash their entire economy and markets, and of key importance to the fed, disrupt the functioning of the UST market and the ability of the government to fund itself. We’ve already seen the Fed pivot twice in recent years due to the latter. Third time coming.

      So the hot game now in the market casino is betting on when jpow will “pivot”. People say that powell is no volcker, but to be fair to powell (and btw I’m no fanboy of jpow), volcker had 30% federal debt to gdp instead of 130%, and 2% annual federal deficit to gdp instead of 6% + climbing. In other words, you can stomach rate increases when you’re solvent but not when insolvent. And the peak real interest rate in each cycle is lower and arrives sooner. I’d bet the Fed pivot comes much sooner than mid-2023 as markets are currently discounting. Maybe even before the autumnal equinox?

  6. Misha Says:

    Yea, good to see you back. The link to the podcast is not working, at least for me

    • Misha Says:

      *Yra (autocorrect did its job)

    • David Richards Says:

      Same (“recording does not exist”). But the podcast worked yesterday. Daniel is awesome.

      There have been numerous awesome podcasts here. High quality discussions. Greatly appreciated. Also, I’m impressed and envious how you and FRA are able to get access to these people. Full respect.

      June has been a good month for some great, complimentary interviews. For your enjoyment and benefit (I hope), here in no particular order are three more I treasured (they’re all bearish, lol):

      Stanley Druckenmiller reflects at Sohn Investment Conference

      Julian Brigden, President MI2 and best mind in RV Macro Insiders

      Julietter Declercq, a smart French economist and trader/advisor with wonderful charts, opines on a coming hard landing:

      • Yra Says:

        David—as always it is great to get your input—-all compliments go to Richard Bonugli as just send me a note that he has so and so lined up and would i like to participate.This morning live from Sintra we go a bloomberg tv piece of Powell ,Lagarde ,Bailey and Carstens from the BIS—Carstens is head and shoulder sabove the the colonialist central bankers and he raises a very,very critical point about emerging martket banks preempting the FED in an effort to keep their currencies stable against the Dollar—this is helping lead to a global slowdown as the huge debt load brought about by FED policies means it is of paramount importance to fight dollar strength with ever more contractionary policies—as you note and I wrote four weeks ago even Volcker couldn’t find his inner volcker in this debt plagued world

      • David Richards Says:

        Yra, a few comments in reponse to your video and reply…

        Some sharper minds than mine point out that another difference between the Volcker era and today, besides the debt load, is the demographics and culture. In Volcker’s day, we had the economic tailwind of a large number of young boomers entering the workforce and ramping discretionary spending, the opposite of today as boomers are retiring daily and slashing their discretionary spending. In 1979+ we also had a rising proportion of women going to work and finally obtaining “upwardly mobile” positions, whereas today that’s already a done thing and no longer a source of growth like before.
        So demographics have become an economic headwind today instead of an economic tailwind as in 1979, making it more difficult now to raise interest rates now than back then.

        When we talk about emerging markets, we must remember that of course they’re a vastly divergent lot. Same for so-called developed markets. Looking at some recent international capital flows, yes the US is currently drawing in much capital, but so are a number of so-called emerging markets, whilst “developed” western Europe experiences large capital outflows. For example:
        A couple of those capital-attracting emerging markets were investment winners this year and in May-June, while western markets melted down, so capital flows analysis can be helpful like how insider buyer/selling analysis is.

        When you speak of the yen, I wonder why is it that Japan has been able to so deliberately weaken the yen so substantially without protests of “currency manipulation” from the US Treasury? Perhaps the big devaluation of the yen is intentional and a strategy to try to undermine China and Chinese industrial power?

        I hear from some reliable sources that there is growing restlessness in Japan as Ms Watanabee is angry about her collapsing purchasing power. And in Korea, I hear from an old friend in Seoul that their situation is a potential powder key, for different reasons than inflation (which tends to tear society apart), as the most popular president in Korea’s history has been replaced (due to constitutional term limit) by their most unpopular one ever – with charges of vote-rigging (sounds familar?. Underneath it all, Korea is suddenly quite turbulent, and Korean women & youth are in a mood to uncharacteristically fight to “take their country back” from the military-industrialists & neocons who’ve allegedly hijacked it (also sounds familiar?). KOSPI has been pummelled, except for the military-related beneficiaries of the unpopular new regime.

        Over in China, it’s interesting and potentially profitable how their cycles are different – both the liquidity cycle and the covid cycle. After having had relatively tight monetary and fiscal policies, Bejing has finally opened the spigot with a large liquidity injection and big stimulus spending. So we’ve already seen in June their divergent policy produce much better market results which may continue and offer a tactical opportunity, though I’d agree with Arthur that china is not a prime strategic investment opportunity anymore as it used to be years ago. Nevertheless, it might help provide a much-needed tailwind (with a lag) to the rest of the world later this year? And so if/when Powell pivots, the whole world could be rapidly reflating. Keep your head on a swivel!

    • David Richards Says:

      Because the link to the podcast with Yra and Daniel isn’t working, here’s another link to this same episode on utube. Enjoy!

  7. Darragh K Says:

    Yra, great to see you back. Thank you very very very much for the content you produce. It’s both amazing and wonderful that curious minds from across the world can learn from your well earned and no doubt hard fought wisdom.

    I just watched your discussion with Martin Barnes. Overall it was very interesting, but I was disappointed with his somewhat flippant comment on energy and grains. He is correct in saying grains will find a way out of Ukraine, but the real question is at what price?

    I see so many medium to long term inflationary pressures on grains right now: 1) Inflation in grains began before the war in Ukraine. Similar inflationary shocks in the past have put a new floor under grain prices and kept them pushing their ATHs for a decade thereafter (1969 inflation shock followed by 70s grain prices). 2) Everybody agrees the situation in Ukraine won’t be resolved soon. Russia has already proven quite the poker player with its commodities, why would grain be any different? 3) With the continued march towards banning all fossil fuels, farmers are the only ones who will be able to produce gasoline and diesel replacements at scale (think commercial diesel and aircraft). Not to mention plastic (PLA). The greens will hold their noses, but they will take it over drilling. Why is nobody is talking about this? 4) 37% of US farmers are over 65. An aging problem has been brewing in farming for years. I would love to hear you thoughts Yra.

  8. Yra Says:

    Darragh —-great post thanks and thanks for your kind words.I too was disappointed with MB as I have been a fan of BCA for forty years.He is too comfortable with the Powell outlook that central banks have printing presses so no solvency worry.As I noted I hold the G7 in contempt for not organizing a massive grain purchase to ensure that emerging market economies will have access to food and pay for it with an IMF SDR program which would move to undercut Putin but so far Putin’s snactions on energy and food are the winner in sanctions war.As far as the grain story i would advise going back to the John Dizard/Yra Harris FRA podcast where John laid out his fears for the grain markets first and foremost as a result of the lack of fertilizer.The US markets are calming in the face of etter weather but we are far from being removed from a major global calamity—-beans and wheat are both elevated still—with the cut back in fertilizer use it will not take a major drought to drive prices much higher.A major catastrophe looms as my “guitar gently weeps”

  9. pittrader1988 Says:

    What’s up with the eyes? I though it was just your wife’s eyesight that was bad since you have a face made for radio! Get well soon!

    • Yra Says:

      Jeff—all good thanks as good as could be as far as I am concerned so will be back to full piss and vinegar with respect towards all but can get back in the seat

  10. Misha Says:

    Yra, you have voiced the investment thesis for the Mexican peso years back. It’s been in an uptrend since late last year, it seems that now all stars are aligned for MXN to shine, what’s your take?

    • David Richards Says:

      Interesting point. So if MXN uptrends, does that make those 9-10% mexican sovereign bonds relatively compelling?

    • Yra Says:

      Misha –indeed yes but Mexico keeps getting in its own way as it is highly geared to take on China’s role in the world.It still cannot tame the corruption that has interceded to keep it from always being the great growth story but failing to fulfill its potential-At least it is now more then an energy spigot but it needs to rein in the corruption but its short supply lines to the US and its potent labor force and a very competitive currency continue to make it a compelling economic power

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