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The US government is inviting inflation

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Re: The US government is inviting inflation

#31

Post by moritz64 »

kyrieeschaton wrote: post #16

20% of all dollars were created in 2020. The only thing preventing that from translating into the broader price level is that money velocity collapsed due to the Covid shutdowns. Instead most of that has channeled into financial and property asset prices. Once velocity increases, as is the plan if you assume 2021 is the year we "recover" from Covid restrictions, the Fed will have a choice between inflation and deflat…

To expand on "money velocity": Inflation reaches high-priced assets and those which are largely bought by institutional investors first - Real estate and equity.

Cantillon's effect is the keyword: https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_the...

Re: The US government is inviting inflation

#32

Post by kthejoker2 »

locallost wrote: post #10
zpeti wrote: post #2

After following Peter Schiff for over a decade, and him being thoroughly wrong about inflation after 2008, I can't help but think "this time is different". Before 2020 all money printing went to banks, which increased the wealth of the 1% and increased asset prices, but it didn't create inflation. But now, we have actual helicopter money. And this time I believe Peter when he says, once you start with stimulus cheque…

I listened to what Schiff had to say in 2008, but the same talking point of how he was right became tiring quick. Eventually years later I realized he basically always has the same forecast of impending doom, that just happened to be correct once. So he's a bit of a broken clock is correct twice a day person.

Economists have correctly predicted 8 of the last 4 rrcessions.

Re: The US government is inviting inflation

#33

Post by waheoo »

sovsovsod wrote: post #21
zpeti wrote: post #2

After following Peter Schiff for over a decade, and him being thoroughly wrong about inflation after 2008, I can't help but think "this time is different". Before 2020 all money printing went to banks, which increased the wealth of the 1% and increased asset prices, but it didn't create inflation. But now, we have actual helicopter money. And this time I believe Peter when he says, once you start with stimulus cheque…

Was he really wrong? If I gift money to an extremely over leveraged banks to save them and, with puckered sphincters (they just saw the abyss), they hold onto it then we won’t “see inflation”. It’s there, but it’s latent inflation. If I demolish wages by exporting jobs overseas, that will have a deflationary effect to counter the effect of inflation. If I replace cocoa butter with food wax, I hide inflation. If I don…

What's the argument for housing not being included thats blizzare.

Re: The US government is inviting inflation

#35

Post by trey-jones »

duxup wrote: post #14

We heard the same thing after the post 2008 stimulus too. It seems some of the very obvious predictions aren't so easy anymore. I understand where folks are coming from generally with these predictions, and I don't necessarily disagree with a lot of their ideas..... but the outcomes just don't seem to follow.

Do you believe that the consequences of 2008 have been fully borne out? I think it's possible that one day we or someone else will look back on 2008-20?? and judge the consequences of "quantitative easing" which hasn't really stopped during this entire period. It seems to me that we've just been kicking the can further and further down the road.

Re: The US government is inviting inflation

#36

Post by neffy »

kyrieeschaton wrote: post #16

20% of all dollars were created in 2020. The only thing preventing that from translating into the broader price level is that money velocity collapsed due to the Covid shutdowns. Instead most of that has channeled into financial and property asset prices. Once velocity increases, as is the plan if you assume 2021 is the year we "recover" from Covid restrictions, the Fed will have a choice between inflation and deflat…

It's not velocity - that's a red herring (complete misunderstanding of monetary behaviour by Rothbard et. al.)

There are a few things going on simultaneously, one is that a lot of the new money is going into the finance sector, so there is inflation, but it's in share prices which doesn´t get captured by the CPI measurement. The other thing is that banking regulation no longer depends on the reserve requirement, but on the capital reserve requirement which controls how much lending the banks can do (and through that the amount of money creation.) So the inflationary spiral is now, banks increase capital, which increases lending, which increases the money supply, which increases the value of existing capital, etc. It is fortunately a lot slower than what would have happened if the old asset reserve requirement was still all that controlled the system. You can see it starting to affect M2, but it will take a while to feed through.

Re: The US government is inviting inflation

#37

Post by jlangenauer »

xwdv wrote: post #22
turbinerneiter wrote: post #13

Earlier quoted context omitted.

So, bailing out the rich is good, feeding the poor causes an inflation crash. What a world we live in.

The poor would soon learn their one shot out of poverty is keeping their job and throwing their UBI income straight into the stock market. This would propel the prices of equities to even greater stratospheric heights, and as the investor class gets richer eventually the prices of all commodities rise to capture this easy money flowing around. So now the poor have more money but it still buys less or equal to what it…

Any UBI is not going to be "in addition to" whatever other money you might earn, but is more likely to look something like a minimum income, below which you cannot drop (even if you stop working).

Re: The US government is inviting inflation

#38

Post by thedudeabides5 »

kyrieeschaton wrote: post #16

20% of all dollars were created in 2020. The only thing preventing that from translating into the broader price level is that money velocity collapsed due to the Covid shutdowns. Instead most of that has channeled into financial and property asset prices. Once velocity increases, as is the plan if you assume 2021 is the year we "recover" from Covid restrictions, the Fed will have a choice between inflation and deflat…

MMT is pretty simple.

Run inflation higher than interest rates to push down the nominal value of debt.

Usual example is the UK after WWII.

https://fred.stlouisfed.org/series/CPIIUKA

You don't need hyper inflation to inflate away your debts, just enough monetization to bring indebtedness in line.

Now, does that mean the currency will retain value vs real assets, no it means the opposite.

Hence the move in stocks, real estate, bitcoin, gold, etc;

Re: The US government is inviting inflation

#39

Post by kthejoker2 »

wayoutthere wrote: post #25
beervirus wrote: post #5

Assuming he’s right, what do I do about it? Buy gold? Buy BTC? Buy foreign equities?

Not sure any of those will protect you. US equities should perform ok — IMO they’re already inflated because that’s where most of the “extra” money supply is sitting on the sidelines. Commodities futures (namely food) are probably your best play. This has happened before — 90s Japan is what the US has in store for the 20s. The same collection of factors (high valuations after decades of rapid growth, a declining birt…

It's not birth rate / current demographics, it's population growth, we have plenty of immigration upside if we're looking for economic juice.

Re: The US government is inviting inflation

#40

Post by gizmo »

kyrieeschaton wrote: post #16

20% of all dollars were created in 2020. The only thing preventing that from translating into the broader price level is that money velocity collapsed due to the Covid shutdowns. Instead most of that has channeled into financial and property asset prices. Once velocity increases, as is the plan if you assume 2021 is the year we "recover" from Covid restrictions, the Fed will have a choice between inflation and deflat…

The FED strategy is to do enough to keep the recovery going, but not so much that it overheats. GDP growth will over time make the debt burden bearable as interest rates tick higher.

With 10 million unemployed and 44% of households being behind on mortgage/rent/bills the economy is not going to roar back to life. With demand depressed because the actual economy hurting badly inflation will be moderate and temporary and deflation will remain the top concern of the Fed.

Of course we do see prices in some areas going up. Houses for instance. But that makes sense when you think about it. Nobody wants to move to a smaller house/apartment during a pandemic, and millions are simply not paying their mortgage instead of downsizing. Meanwhile those with money are moving away from cities and buying bigger places. The implications for housing prices are obvious. But this asymmetry won't last because the relief programs are temporary.

Burry believes that rising prices and some inflation proves we are at the cusp of Weimar Germany style hyperinflation. That is, at least for now, not borne out by the data in the slightest.

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