Great stuff from Albert Edwards of Societe General.
You have probably already read enough opinions on the banking crisis without wanting me to further perplex you. The easy conclusion is that the rate hiking cycle is at the root of the current turmoil (tide going out, etc.). But what is really at the root of it all is excessively loose monetary policy for far too long prior to the current tightening cycle. Indeed, since the early-1990s almost every recession has been triggered by the Fed blowing up the financial and/or property sectors as it attempted to raise rates on economic grounds.
Instead of ranting about the current crisis I want to revisit a topic that goes straight to the hearts of both equity and bond investors, namely that the primary driver of this inflation cycle is soaring profit margins. Rather than calling this out as the primary cause of high inflation, central banks have instead chosen to focus on rising nominal wages as threatening to embed higher inflation – the so called ‘wage/price spiral’.