WEEKEND WRAP (Part 2 of 3): 2022 in Review; Russia, Sanctions, Inflation, Fed Policy

Part 2 of 3

Part 1 of this expanded WEEKEND WRAP was mostly about numbers. This part will revisit some of the more important developments of 2022 and how they intertwined through the global economy.

It’s a new year, but the events of the prior one continue to resonate. Military conflict in Ukraine proceeds, sanctions remain in place, inflation continues to plague Western nations and central banks around the world remain committed to raising interest rates with slowing growth as a primary policy objective.

Those were the main thrusters of 2022. How the world arrived at this place is simple, non-revisionist history, important to keep front of mind as the new year evolves.

This will be brief. Other publications and websites have the time and patience to review recent history. What’s necessary in a financial context are facts and outcomes.

COVID-19 and various government responses can be blamed for a plethora of evils brought upon the world, but beyond the deaths and illnesses, two important financial aspects have emerged. First, the widespread lockdowns destroyed many a small and medium business in the US, UK, and EU. Second, between the central banks and governments of most advanced economies, the currency liquidity spigot was opened wide, giving rise to mal-investment, speculation, and eventually, runaway inflation.

2020 and 2021 set the background for the current environment. Failure of hundreds of thousands of small and medium-sized businesses did irreparable harm to the business owners and to the robustness of local, regional, and national economies. Nothing can easily replace a “mom and pop” type of operation, be it a hair salon, restaurant, retail operation, or any enterprise that serves a clientele defined by locality or niche.

Many communities were financially devastated by lockdowns and government restrictions, as if the usual paperwork and regulations weren’t already enough of a burden; the lockdowns were specifically designed to target smaller firms, to limit competition as the WEF Great Reset agenda chose winners and losers.

Walmart and Kroger’s were "essential." Grandma’s Knitting Shop and Bob’s Diner, not so much. They were forced to shut down… temporarily… two weeks to “flatten the curve” we were told. As the repressive lockdowns extended from weeks into months, the government went further. At the federal level, the CARES act was legislated, a multi-trillion dollar monstrosity that flooded the US economy with stimulus, business loans, extended unemployment benefits and more. The Federal Reserve enacted a slew of programs to assist their corporate buddies in ways Keynes and Austrian economists never conceived.

After all the masking, shaming, lending, and glad-handing was complete, the world generally emerged from lockdown and WHO hell in January, 2022, the Omicron variant of the virus ineffective at holding people back from jobs, education, social advancement. People had had enough and moved on, but not without some radical changes. Many of the temporarily-closed businesses never re-opened, an army of commuters found work-from-home (WFH) a better environment for family and mental health and many businesses agreed. The world was making a quantum leap to a post-industrial age, or so we were told.

Additionally, some people had taken advantage of the unusual conditions to save or pay down debts and other obligations with the help of rent and mortgage moratoriums or forbearances. Corporations and individuals were flush with cash. The federal government ran enormous deficits to fund the greatest wealth transfer in history. While individuals and families were, for a large part, solvent, some segments of the corporate world were struggling while others prospered. Nowhere was this more evident than in the success of Amazon and the distress of brick and mortar retailers.

In what is surely the most distorted aspect of all the COVID fallout, financial analysts and economists began making comparisons to 2019 for revenues and earnings of public corporations, treating 2020 and 2021 as if they never existed. The entire episode a gigantic fraud, when the economy began to "normalize," Wall Street took note. Inflation ran hot from mid-2021 through the end of the year and then accelerated. The bear market in stocks began in November, 2021 and deepened by January, 2020. The Fed began tightening financial conditions via a series of hikes to the target federal funds rate in March, 2020 and proceeded to increase them in frequency and size for the rest of the year. Inflation must be contained, they said, as the CPI hit eight and nine percent by summer.

As inflation raged and stocks declined, by late February, NATO and its US, UK, and EU members had finally pushed Russia into invading Ukraine. Through a series of purposely stalemated negotiations and advanced military activity (Ukraine shelled the Donbass since 2014), Vladimir Putin and Russia were left with the only choice: military involvement. Russians rolled into Ukraine and the carnage began. At the same time, Western governments began a series of sanctions and adverse actions against Russia in response to their "aggression," including seizing government assets and those of wealthy Russian citizens (oligarchs).

Similar to the COVID show, the Western response to Russia doing little more than basically defending itself is based on a false narrative that continues to this day via the propaganda mainstream media that goes something like: "Russia is aggressive; Ukraine is a democracy. Support Ukraine."

Americans, Brits, and Europeans are too busy figuring out how to stay solvent, eat and heat their homes to offer much in the way of popular resistance. The Nanny State and Big Brother have been married, forming the new fascist family of nations. Things have changed incrementally, not necessarily for the better.

The message from official Washington, London, and Brussels is quite clear: We will Build Back Better. You will eat at McDonald’s and shop at Walmart, or, a condition similar to full spectrum dominance. And it will cost more every day.

Thus, as we recollect on prior events these early days of January, the pieces have all fallen into place. At last reading, CPI is still above seven percent. Stocks and bonds are still under pressure. Russians and Ukrainians continue to battle and die. Western governments continue to fund the madness while grifters in congress and the White House steal and launder money disguised as government appropriations.

Part 3 of this 3-part WEEKEND WRAP will examine current conditions and offer suggestions and projections on how 2023 may unfold.

This article was simultaneously published at Downtown Magazine.

Copyright 2023 Downtown Magazine Inc.. All rights reserved.