There are signs of escalation everywhere you look.
It seems that Russia used hypersonic missiles in its early-morning raid for the first time. Marked as retaliation, but could also be the beginning of new phase in #UkraineRussiaWar️ .
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Poland and others are sending more tanks, on which first ones should be in operation in Ukraine in this month. Bakhmut, on the other hand, is falling to Russian hands (to the Wagner group).
The war is not going as we in the west have been told. 2/
The buildup of Russian troops to Donbass region has been massive, according to many reports.
The reason for this is unclear, but large troop buildups rarely occur just as a "show of force".
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Moreover, President Volodymyr Zelensky has warned that if (when) Bakhmut falls, the road to East-Ukraine lays bare.
While this could be a propaganda trick, many see Bakhmut as a crucial logistical hub. 4/
As a historical 'appendix' we also report the best performing stocks during and after the GFC and the Great Depression. (Free.) 3/ gnseconomics.substack.com/p/the-best-per…
It also seemed that the U.S. credit markets were in the grips of a (fallacious) complacency, shown on the proportionally milder reaction of the "junk" bonds on the current tightening cycle.
But, can the #Fed support the markets in the current situation? We're not so sure. 2/
The good news was that the "zombie-corporation" problem seemed to be less severe than previously thought.
However, we also know that the ultra-easy monetary policies has created weak highly indebted firms. 3/
The global business cycle is forecastable around 4-5mo ahead and the provision of liquidity into the financial markets is forecastable around 2-3mo ahead, currently.
The onset of economic crises is much more cumbersome and uncertain to forecasts.
A short 🧵on what's coming. 1/6
The flow of aggregate financing in China sputtered in October and fell of a 'cliff' in Nov/Dec. This implied that
1) This month will see first signs of a renewed decline in econ. indicators. 2) Decline will deepen in March and April.
Past week I promised a (long) thread on global #liquidity and so, here goes!
I have been analyzing the current state global liquidity since early November. Then I warned on possibility of an outright collapse of market liquidity.
🧵1/25 mtmalinen.substack.com/p/global-liqui…
Basically, I re-iterated our original warning from October 2018, when we had discovered that:
1. Global outside-US dollar denominated debt has risen to a record. 2. The role of non-bank institutions on providing funding has increased.
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3. The composition of international credit has shifted from bank loans to debt securities.
These straight-forwardly implied that:
"The increased role of non-bank institutions in providing credit means that an increasing proportion of international finance comes..."
3/
Everything you need to know is summarized in this graph. It shows that Chinese business (debt) cycle leads European cycle by around 3-4mo and the global business cycle by around 4-5mo.
In tight turning points (crises), with synchronous response, the lag is shorter. 2/
This relationship was revealed in 2015/2016.
In 2015 Chinese leaders tried to stabilize the economy by tightening the availability of credit especially to the manufacturing sector, which led to a slump in the Chinese housing market, which had already weakened in 2014. 3/