Didier Darcet
1 October 2021

No, Is Like Cash

«Yes, is like credit, no is like cash,» said Cornelius Jacobus Langenhoven a century ago, the writer who composed the South African national anthem.

On one hand, inflation is back this year, globally. That is a fact. Whether it’s temporary or not, no one can say. On the other hand, global liquidity in USD for the first time in eight months is tightening. This is a major macroeconomic event of the month.

A contraction in liquidity in an inflationary context is a harmful configuration for equities, but also for bonds, be they long-term ones with a fixed coupon, or short-term ones with an inflation-indexed coupon.

It is no longer unreasonable to say “no.” And no, is like cash.