SVB Carry Crash Increases Deflation Risk…But Not For Long

In The Rise of Carry, which I co-authored with Tim and Jamie Lee, we explained how the growth in carry trades has reshaped the financial markets and global economy. The book was published in late 2019 and contained several observations that few grasped at the time, but that are now becoming more mainstream. Given the “don’t fight the Fed ethos” that dominated markets, perhaps our most controversial assertion was that the Fed was losing control:

“…the carry regime creates the sense that central banks are all powerful even as, in a fundamental sense, they are becoming weak.”