text: The financial “nuclear” option. As Bridgewater’s Ray Dalio has described, the US and China are locked in a capital war, where the two countries are attempting to deplete the other of foreign investment. These are “gray zone” tactics intended to cause harm but remain well below the risk of conventional conflict. China does not want a high intensity conflict with the United States and its global allies, so the exploitation of the gray zone remains its preferred course of action. If a financial “nuclear” option becomes necessary, the United States could threaten to cancel its own Chinese-held debt in lieu of war reparations or to punish China, below the threshold of conventional war, over a military campaign against Taiwan. Similarly, China retains the option to threaten or actually dump US Treasuries, which would not only tank US markets but likely cause an economic, financial and monetary crisis. Both options would cause catastrophic effects for each country, making them a less likely, but not impossible, course of action. I don’t believe hyperinflation is an imminent threat or a foregone conclusion. One observation from the Obama era is that Americans who tend to catastrophize the news also tend to overestimate threats and underestimate the strength of the US, the value of the country’s natural resources, and the ability of the Fed and US Government to change the rules as they go along to ensure some level of stability. Pundits like Gerald Celente and Jim Rickards, Jim Rogers and David Stockman, among others, have created so much fear and at points warned their readers and listeners to dump stocks and move to hard assets due to a Greater Depression, hyperinflation, or some other imminent calamity. They’ve been doing this for over 10 years, and in hindsight, that’s been horrible advice as the Fed has continued to pump up equity prices while silver and gold have underperformed the S&P over the same time period. Even being in cash has been a horrendous return on investment. The Fed won’t always be able to change the rules as they go along, though. My belief is firm that we will at some point experience an economic, financial, and monetary catastrophe, but that could still be years or decades away. The national debt could conceivably expand to $40-50 trillion without triggering hyperinflation. In context, Celente and others were warning of imminent hyperinflation back when we eclipsed $10 trillion in national debt, which has nearly tripled since those dire warnings. I look at Japan, for instance, which has run sub-1% interest rates for the past 20 years and has a debt-to-GDP ratio of 257%, and yet has not experienced hyperinflation there. There are many differences between the US and Japan, but national debt for a superpower doesn’t alone lead to hyperinflation.There may be black swans or other events not included in my list, but these are the six plausible scenarios that concern me regarding hyperinflation. – M.S.ECONOMIC WARNING INTSUMPowell’s 2022 outlookDuring confirmation hearings for his second term, Federal Reserve Chairman Jerome Powell reassured members of the Senate that supply-chain bottlenecks would decline this year and price pressures would come down as a result. Powell called inflation a “severe threat” to economic recovery, and conceded that inflation “will last well into the middle of this year” because it will take at least “two to four meetings to go through the balance sheet decision.” That puts the $8.7 trillion balance sheet in a position to continue rising beyond what some economists think is appropriate, putting the Fed “behind the curve,” according to UBS Global Wealth Management’s Kelvin Tay. Powell did say that reduction of its balance sheet will happen far more aggressively than any previous reduction. Powell went on to mention that the “United States debt is unsustainable, and it is best to address it soon.” – T.W.GOP: “Bidenflation” harming American consumers