text: The biggest risk I see into next year – somewhat of a worst case scenario – is that 1) the Fed is unable to kill inflation (a no-brainer), 2) attempts to combat it results in a recession (another no-brainer), 3) the Fed judges that fighting inflation during a recession is too painful and risks a deep economic depression, 4) the Fed reverses course, loosens monetary conditions, and inflation spikes even higher, and 5) the Fed is still unable to stimulate the economy out of recession as month-over-month inflation accelerates. If this sequence of events does end up happening, it puts Ray Dalio’s inflationary depression scenario into view.As always, I don’t have a crystal ball, and I don’t make predictions. The best I can do is put the pieces together as best I can, form a range of competing conclusions, and identify what I believe is most likely to happen while noting the most feasible worst case scenario. Unfortunately, I believe a worst case scenario is growing more likely. – M.S.INSIDE THE BELTWAYWHITE HOUSE: President Biden is attending the third session of the NATO Summit in Madrid, Spain. CONGRESS: The House and Senate are not in session, although there are some hearings. The Task Force on Financial Technology Subcommittee is holding a hearing entitled, “Combating Tech Bro Culture: Understanding Obstacles to Investments in Diverse-Owned Fintechs” and the Tom Lantos Human Rights Commission is holding a hearing on worldwide discrimination against Muslims.STATE: Secretary of State Antony Blinkin is attending the NATO Summit and is also scheduled to attend a Global Food Security ministerial meeting in Germany.SCOTUS: Biden appointee to the Supreme Court Ketanji Brown Jackson will be sworn in following the retirement of liberal Supreme Court Justice Stephen Breyer at noon. Jackson will be the first black woman to serve on the Supreme Court. DOMESTIC INTSUMFOOD & AG: Global food prices will continue to be affected by drought and trucker strikes in Argentina, which exports about 4% of the world’s wheat. Truck drivers in the port city of Rosario are protesting high diesel prices and shortages, causing severe disruptions to wheat and other agriculture exports. Argentina exports about 4% of the world’s wheat and about 17% of the world’s corn. Officials say the diesel shortages will be solved within the next three weeks. Russian Foreign Minister Sergei Lavrov said that Russia is ready to work with the United Nations to resume Ukrainian grain exports, although he didn’t commit to any specific steps. Meanwhile, commodities traders expect favorable news on U.S. corn plantings, which the USDA will report on later today. We’ll have an update in tomorrow’s EW. A new report shows that U.S. hog herds have contracted by 1% since last year due to drought and higher feed prices. – M.S.ENERGY: Utility providers across the nation continue to warn of critical supply and energy shortages amid rising summer heat and the start of storm season. Parts shortages have driven increases in ‘band-aid’ fixes, such as splicing instead of replacing sections of damaged transmission wires to conserve resources. Natural gas consumption for power generation in those western grids has risen to record levels as closures of coal and nuclear power plants in recent years compound drought-induced reductions in hydroelectric generation. (AC: Forecasted major storms and hurricanes are also expected to impact several U.S. states, compounding existing equipment and supplies shortages and potentially knocking oil platforms and refineries offline. Long-term effects of record breaking increases in natural gas consumption across the U.S. and Europe are likely to impact consumers later in the year as decreasing supplies endanger much-needed stockpiles of winter heating fuel. – R.P.)