Tightening Effects: Demographic, technological, and globalization trends made the period of low inflation a breeze for policy. Unemployment and inflation were low. When things were going well, inflation stayed low as companies found cheaper ways to do more through new machinery and moving capital to lower-cost regions. Increases in policy rates were slow and predictable, with fiscal policy being an afterthought. We are a long way from that world. Nowhere is this clearer now than in commodity markets. Global manufacturing is in recession and the US dollar is the strongest in two decades. This would typically lead to a 50%-75% collapse in oil prices – we are not close to that outcome. It captures the complexity of the macro environment with low investment, broken supply chains, and war, leading to a mix of weak growth and high inflation. Chairman Powell emphasized that this mix means that the Fed will be slower to ease policy in response to weaker growth – rates may peak soon, but they won’t be cut quickly. The challenge for Europe is even more extreme. Policy rates need to rise heading into a recession, yet they also need to support the bond markets of peripheral countries. Nationalism is rising in response. Voters outside of Europe’s monetary union want to maintain that. Sweden’s Sep 11 national elections show the far-right Sweden Democrats on strong footing. Nationalist conservatives are ahead in Italy’s Sep 25 elections. The US dollar is the market variable that best spotlights these challenges. A stronger US dollar represents a tightening in global credit conditions. Digital asset markets, an ecosystem with US dollar liquidity needs, are influenced by that tightening. Digital was the fast-twitch muscle signaling broader risks last November. Now, it is benignly responding to them. Policy is telling us that something will break before the next easing cycle. So, the odds of a soft landing are lower. If you don’t want to make omelets, buy some hay to protect your eggs.