Inflation and Future Credit Risk – Pragmatic Capitalism

Here’s my interview with Oliver Renick and TD from yesterday. I brought my sledge hammer with me to demonstrate how Fed policy is currently operating. I also go into detail about the current macro environment and the risks going forward. Specifically:

1. This environment is transitioning from an interest rate risk environment to a credit risk environment. This means credit markets could reamin under duress as benchmark interest rates adjust higher and debt gets reassessed at these higher rates.
2. This is a credit and housing driven downturn. That means it’s going to be more of a disinflation story in the future and a longer drawn out economic event.
3. The Fed can’t pivot at this point because they’ve already turned over the ball. I think they’re way behind the curve on inflation and this story will become more and more of a disinflation story as we head into 2023.
4. This isn’t quite 2008 and it isn’t quite 2002. But it definitely isn’t 1978 in my view. That means it’s going to be a tough road to hoe. Patience and discipline are going to be essential for navigating this tough environment.

I hope you enjoy the interview.

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About Post Author

Cullen Roche

Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds. Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.

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