Thread by @sprainhill

From my global macro days, there are a few names that are sort of "Wall Street celebrities". When they visit, half the firm crowds in the room. Zoltan Pozsar is one of those names. He published an extraordinary note yest about the current crisis. Here I break it down for you:

The previous monetary regime, which he calls Bretton Woods II, is OVER. Dead. Finito. It died when the US and its allies seized Russian Central Bank assets, ending the period of CB immunity. Never again will Central Banks be "Made Men" (in the Cosa Nostra way)

Commodity price spikes are being driven by margin calls on traders who need to close short futures position. But when that's over, they are left holding the bag on Russian commods for physical delivery (that can no longer be delivered)

The central planners are totally unprepared for this type of commodities crisis. We have been looking everywhere but at a self-imposed gunshot to the head, because why would we ever have needed to pull that trigger?

There is a Balkanization of commodity markets unfolding currently that will require a complete and entire reset for commodity houses. Credit agreements, operational structure, pricing models, risk management, you name it. It needs to be re-created for the new world.

Every crisis is about the core vs. periphery. This is the alpha, and it's how you ultimately play it (and survive)

The PBoC is absolutely rethinking it's Central Bank Reserves right now

One response may be for the Chinese to print money to buy commodities. Lots of implications there, all of them bad for the dollar in the long run. LT rates skyrocket in the short term. And it doesn't help the west with inflation, we are still stuck.

Just as I was writing this, this tweet hit:

https://twitter.com/DeItaone/status/1501158818545344512

The Fed can provide liquidity but this isn't a liquidity crisis here.

When this is all over, what comes next?

You already know.

Bitcoin.

Hope you found this breakdown helpful. There isn't much I miss about Wall Street, but hearing from brilliant people like Zoltan of @CreditSuisse is one of them.

h/t to @zackvoell for the original share on Zoltan's piece.

plus2.credit-suisse.com/shorturlpdf.ht…