71–80 of 118 posts
It's possible that applying a 1970s filter to the 2020s isn't helpful. Starting conditions are radically different.
That doesn't mean inflation is no longer a thing, but there is evidence that we're a very, very long way away from hitting any kind of inflection point. Many trillions of USD away still.
Assuming he’s right, what do I do about it? Buy gold? Buy BTC? Buy foreign equities?
Inflation is already happening, that is why housing and equities are so high. It isn’t happening equally amongst the basket of commodities that one can purchase, but it is happening in aggregate. This is actually a feature of our currency system. If inflation didn’t happen, everyone would hold back spending until the next year; this is what caused the great depression.
This is the Keynesian explanation for the Depression, and here "spending" includes government spending. In this view, the duration of the depression was exacerbated by FDR's unwillingness to run a deficit to inject cash into the economy.
The other mainstream view (Friedman and Schwartz) argues that the reason a recession became The Great Depression was the Fed allowing ~1/3 of extant banks to collapse (not bailing them out) via cascading failure. There was major asset deflation (35%) and interest rates remained high. The Fed could not issue credit because it was still restricted by the gold standard. (Amusingly: Fractionally limited: 40% of note value backed by gold. A run on redeeming notes for gold caused disproportionate impact on the Fed's ability to issue credit and lead to Executive Order 6102, criminalizing private gold ownership.)
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…
A powerful argument against UBI.
Earlier quoted context omitted.
Voting up because this is the question we should be exploring. If you believe the thesis that inflation is here or due soon (I do) then what?
Get a fixed rate mortgage and buy some property
¯\_(ツ)_/¯
I find Steven Van Metre point of view interesting, see https://www.youtube.com/watch?v=iFdXR4BZ6Fw . I'm a software engineer, so not an expert in macroeconomics obviously, but here are some highlights that I think we are missing to consider when we think inflation is coming: - The USD is the reserve currency of the world, printing money does not only affect the USA but the entire world to some degree. - Money printin…
> I personally find it hard to believe that hyper-inflation will happen, but I also recognize that I'm not certain of this. I feel like you just described the perfect storm for the worst economic depression of our lives, and your conclusion is hyper-inflation is unlikely?
However, a Deflationary Spiral, is way worse in the sense that it makes everyone scared of spending money, prices next year will go down so why buy anything this year? Getting out of deflation is way harder from what I understand.
So yes, I agree with you that I just described a perfect storm (credit to people like Steven Van Metre, etc), but the argument here is that the storm might not be inflation but rather deflation.
What I can agree on is that the end is not pretty either way.
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…
Of course you don’t have to keep the “ceribus paribus” condition, Although I’m skeptical any leader in the USA will break the ceribus paribus.
Hyperinflation, which Burry warns about through imagery of interwar Germany, doesn't just happen. It requires that the money-printing authority keep the presses rolling despite extant and increasing inflation. We have neither of those today.
Earlier quoted context omitted.
> The only thing preventing that from translating into the broader price level is that money velocity collapsed due to the Covid shutdowns. Hum... Money management 101 says that if velocity goes down, you must print more money to compensate. Otherwise you get a deflationary crisis added into your real world one. (And fiscal policy should intervene increasing the velocity, but fiscal policy is a fraud everywhere, so n…
MV=PQ is popular in some circles, but it doesn't describe casual links. You can't reason about how those quantities behave from the equation, which is a mere accounting tautology. Both recently and in QE post-global financial crisis, V went down because M increased without any reason for why the right-hand side of the equation should change.
Wait, if we are talking about 2017-2019, that's a different story. But right now, V got to the floor (everywhere, not just the US) because of the pandemic.