Levels v Growth Rates: High inflation, rapid monetary tightening, asset price declines, and financial strains in the banking system – these are classic deflationary impulses building in the past year. It’s unsurprising that inflation assets like bitcoin suffered in the face of rising consumer inflation – markets never believed the inflation would last. Fast-twitch measures, like core intermediate producer prices, have collapsed from 48% at the end of 2021 to 2% now. Yet, inflation assets are recovering strongly. Why? The bond market is yelling that policy rates are too high to ensure financial stability at a time when price stability is no longer in question. Inflation is considered yesterday’s news –expectations are back in the low 2s even over short 1-year horizons. So, US policy rates are discounting a rapid easing. The subtle differences to previous cycles deserve attention. Price levels are very high. Core produced prices, for instance, are 26% above the previous cycle’s peak, outsized compared to past downturns. The same is clear in cyclical commodities. Copper prices are down nearly 20% from last year’s highs but nearly 2-times the low reached in 2016 and 2020. Inflation assets are hinting at a different cycle, differentiating from sanguine global bond markets. Whatever the next recession, there will be less spare capacity than usual. It'll take a cycle of rapid investment to fix that problem. Inflation-induced fiscal tightening is what all portfolios need to hedge. Bitcoin is vying for that attention.