Changing Tides. Recession is no longer an interesting call. The nature of the downturn is most relevant. It is worth benchmarking to the past. Since 1914, the US economy has been in recession 19% of the time. This includes the abnormally long downturn in the early 1930s that lasted more than three years, well above the median downturn of 11 months. Even ignoring the Great Depression, the economy has been in recession 17% of the time. Our more recent experience has been gentler and softer in many ways. Since the Volcker recession in 1982, the US economy has only been in contraction 8% of the time. Are we due for more frequent downturns? China’s decoupling makes the current contraction unique. Lower inflation and previous lockdowns have China recovering at a time of global recession. It makes a big difference. Take the 2015 period. The decline in world GDP was more severe than the 2008 recession. But back then, the US was the shock-absorber. The response of policy will also matter a lot. How fast does the Fed ease? The market narrative has shifted from inflation concerns to growth risks at lightning speed. Market-based measures of medium-term inflation expectations, at 2.08%, have collapsed. It is quite the balancing act. In the past nineteen recessions, inflation fell by an average of 4 percentage points from the start to the end of the downturn, rising thereafter. The difference now is that inflation will be starting the downturn from a much higher level – 8.6% in May compared to a median of 3.3% at the start of past recessions. Digital is more likely to take its cue from liquidity than growth, living through a brutal USD credit crunch. It is perverse to think that recession could be the best thing to happen to digital asset markets, reinforcing the need for negative real rates over very long periods of time. We’re about to find out!