A long time ago I was pitching a VC and he said my project was Orthogonal to another of his investments. I was young and eager and did not have a clue what that meant, so I asked him. He avoided replying but I persisted because I needed to know if I was going to fit in with this clever fellow and his methodology. He simply would not tell me what it meant which I found strange. Yes, I was young and green. After the nth time of asking I realised he didn’t know what is meant either.
Ortho. Straight. -agonal angle. Combined it means: lines converging or diverging at 90 degrees. Summary: at right angles too. Lets not go further down that fascinating rabbit hole.
What I realised was that some people especially with status and bluff, talk ‘Extraorthanally’.
Extra = out of, Orth = straight, so, ‘Straight out of,’ and Ill leave you to translate the rest.)
So no where near as long ago in 2020, the consensus of ‘Nobel prized’ and well shod economists was that Covid would create deflation and that was going to be a disaster. I wrote here the opposite effect would, obviously, blindingly obviously, more obviously than a giant boil on a Supermodels nose, cause high inflation. It did. They were wrong, I was right, but still no gold medal for me.
Once again the professional economic brains were talking ‘extraorthanally.’ I didn’t understand it. How could they miss the completely obvious. Yet I was still a trifle naïve. They got it wrong because their careers depended on getting it wrong. There was no alternative to inflation, it always follows disaster, but they could say they were going to apply the balm of devaluation.
‘Whoops inflation… who knew? It wasn’t us, we didnt do it.’
So here we are.
The new Federal Reserve Chairman, a ‘hawk,’ so hawkish the market had a little slump when he was the pick, because we all know the market runs on printing money. Of course he is a hawk, what horror, surprising Trump would pick a hawk after not very hawkish Powell had resisted his demands for dovishness.
OK enough sarcasms.
Park him for now and the fact, automagically, J Powell isn’t going to be carted of to the Penn for not printing enough.
Lets think where we are.
We are on the brink of the biggest capital build out in the US since WW2. Onshoring, reindustrialisation and if that wasn’t enough a gazzilion dollar AI built out that will look like Ridley Scott is running the economy.
This will have to be funded.
Finish the following sentence. ‘ It will be funded by______’
If you didn’t put down ‘printing money’ I’d love to know your answer.
… and what does the New Fed Chairman Kevin Walsh say? ‘AI is going to be deflationary.’
We are apparently looking down the barrel of a ‘deflationary bazooka.’
So we know what happens next. An inflationary Bazooka.
‘‘Whoops inflation… who knew? It wasn’t us, we didnt do it.’
Now obviously you’d be prepared to face a Justice Department trial for being a hawk in a Trump administration. Of course you’d be happy to put your head on that block, this is politics after all, a game of ethics played by gentlemen.
Only a cynic would say. Elevated inflation is guaranteed for years ahead, till the day robots are ironing your shirts and showering you with soma and free goods.
Sadly that deflationary spiral is a very long way away and anyone who says ‘deflation is on deck’ must know it in their gut, because I’m sure I’m not the only one who knows what that is connected to.