#1. De-Globalization and the Great De-Moderation

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#1. De-Globalization and the Great De-Moderation

The "Great Moderation" occurred from the early 1990s to 2020 and was marked by low inflation, stable low economic growth and low macro volatility relative to prior decades (and centuries). The forces of the Great Moderation were many and overlapping, such as globalization (off-shoring to low-cost countries), deregulation, technology, debt, demographics, capital over labor, the fall of the Soviet Union leading to pax Americana and an enormous surge in commodity supply from the former Soviet Union, a prior significant non-accessible source. Each of these forces was very powerful, but their powerful convergence over just a few decades was extraordinary.

Several of these forces are now reversing or are in full retreat, pressuring inflation and macro volatility higher. If globalization drove low inflation, stability and macro volatility, then de-globalization will put all this into reverse. One of the critical fallouts from de-globalization will be its fracturing effect on supply chains. The world has entered an economic war (U.S. and China) and a hot war (Russia, Ukraine and NATO by proxy), and global supply chains are an immediate casualty. Reshoring or near-shoring requires rebuilding supply chains and securing inventory. Inventory will move from a just-in-time model to a just-in-case model, requiring more supply and higher inventory levels than in the past. The economic and military geopolitical realignments are moving quickly. Markets remain highly focused on headline inflation, but de-globalization realities are moving forward rapidly.


Just in case really means creating or printing the product locally or in the same country.

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