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It’s mostly a demand shock, not a supply shock, and it’s everywhere

bridgewater.com

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Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#21

Post by P00RL3N0 »

nwiswell wrote: post #8
P00RL3N0 wrote: post #4

I'm honestly surprised inflation hasn't been worse than what we've already seen. 10-year treasury yields are still well below their 2019 levels and are currently below their levels from Q2 of this year.

Do treasury yields actually have a causal relationship with anything besides the demand and supply of treasury bonds? I don't see any reason why we can't have a negative real yield (indeed, I suspect that is presently the case).

You may be right on the negative real yield. My thinking was that, ceteris paribus, if expected inflation is rising I would expect interest rates to rise as well. QE has likely been playing a large role in muting this effect.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#22

Post by ArtDev »

"Household balance sheets are now in a materially better state than they were pre-pandemic".

I think this is completely of touch with the realities faced by different slices of society.

I am a web developer who was working from home for many years before the pandemic. My experience is not even remotely similar to most people in the US.

Edit: this article is written by a hedge fund. So they definitely live in their own little world too.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#23

Post by paul7986 »

Seems like all that free money and no one working has definitely caused a supply issue ... yet everyone has tons of money furthering pushing up demand yet supply to meet the demand has shrunk.

For those who push for a universal basic income where large groups of people do not work ... do not help produce the supply only push up the demand. Why do you think UBI is still a good idea and you are perfectly fine with how things are now vs. how they were?

*Please note i want workers to be paid more then fairly and when i go out i tip up to 30%, as well happily pay $60 to $100 for dinner at Applebees (or similar places) for a friend and or a date and myself.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#25

Post by Jensson »

zz865 wrote: post #9

I can remember when a year ago everyone agreed they were happy with consuming less and spending time with the family. Looks like that didn't last long, everyone is out shopping again.

USA never stopped consuming, they just import more and more. Trade balance is even more negative now than before the great depression, there should be a correction happening real soon:

https://tradingeconomics.com/united-states/balance-of-trade

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#26

Post by radicaldreamer »

arthurcolle wrote: post #10
throwaway2331 wrote: post #6

For anyone scratching their head on what "MP3" is: monetary policy 3, i.e. "helicopter money," i.e. "the government be handin out them stimmies," i.e. the government injected COVID-19 relief funds into the economy, giving an across-the-board increase in demand for goods & services, but there aren't enough "goods & services" to keep up with this demand.

Thank god we have crypto & NFTs to help people use all this free cash

Exactly, without that escape valve, the value of "real" goods would be skyrocketing even more.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#27

Post by nine_zeros »

arthurcolle wrote: post #10
throwaway2331 wrote: post #6

For anyone scratching their head on what "MP3" is: monetary policy 3, i.e. "helicopter money," i.e. "the government be handin out them stimmies," i.e. the government injected COVID-19 relief funds into the economy, giving an across-the-board increase in demand for goods & services, but there aren't enough "goods & services" to keep up with this demand.

Thank god we have crypto & NFTs to help people use all this free cash

This is not even a joke. Crypto has absolutely helped absorb the inflation.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#28

Post by pishpash »

P00RL3N0 wrote: post #21
nwiswell wrote: post #8

Earlier quoted context omitted.

Do treasury yields actually have a causal relationship with anything besides the demand and supply of treasury bonds? I don't see any reason why we can't have a negative real yield (indeed, I suspect that is presently the case).

You may be right on the negative real yield. My thinking was that, ceteris paribus, if expected inflation is rising I would expect interest rates to rise as well. QE has likely been playing a large role in muting this effect.

The metric you want is the breakeven rate, the difference between nominal Treasury yields and TIPS yields (which are indeed very negative).

https://fred.stlouisfed.org/series/T10YIE

The Fed is artificially holding real yields negative on the short end for years at a time to enable money-losing ventures to "prosper" in order to "stimulate" the economy. It gets people working and society running but the long-term misallocation of capital can't be good. Real yields have been negative out to 30 years for some time now, meaning the real economy could well be full of stuff that destroys value over a 30-year horizon as a norm!

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#29

Post by evergrande »

arthurcolle wrote: post #10
throwaway2331 wrote: post #6

For anyone scratching their head on what "MP3" is: monetary policy 3, i.e. "helicopter money," i.e. "the government be handin out them stimmies," i.e. the government injected COVID-19 relief funds into the economy, giving an across-the-board increase in demand for goods & services, but there aren't enough "goods & services" to keep up with this demand.

Thank god we have crypto & NFTs to help people use all this free cash

Actually, that's a good point. Inflation would be even worse if that cash was going into physical goods and services. The government now has an incentive to leave crypto alone aside from providing clarity.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#30

Post by throw0101a »

The "shock" is actually a bit more subtle than that:

> Here's 10 years of the relationship between our consumption of goods and our consumption of services. It explains a lot about why we're experiencing bottlenecks and disruptions. We were simply not prepared for the massive uptick in goods consumption.

* https://twitter.com/TBPInvictus/status/1456683999657615364

When people couldn't go out and do stuff (services) they started buying stuff (goods), and the supply chain couldn't handle the sudden surge… so now we have supply problems.

The supply problems are often 'subtle' as well. For example, a few months ago softwood lumber in the US hit a peak of $1733/lot, and now it's down to 'only' about $600—which is still 50% higher than it historically ever was before.

However there is a 'glut' in the supply chain because current inventories can't be shipped because… there is a shortage of truss plates:

* https://en.wikipedia.org/wiki/Truss_connector_plate

Floor trusses can't be built, so even though you've built the first floor walls you can't go to the second because the floor framing—built using trusses—can't be laid down, so houses can't be finished. Further details about the current (Nov 2021) lumber situation on the most recent Odd Lots podcast:

* https://player.fm/series/series-1504378/stinson-dean-on-the-...

* https://www.bloomberg.com/news/articles/2021-11-08/transcrip...

* https://www.bloomberg.com/news/articles/2021-11-08/how-a-2-m...

Similarly even if you built most of the house, you can't legally occupy it unless there's running water—and there's a shortage of faucets:

* https://player.fm/series/series-1504378/the-bathtub-episode-...

So the demand and supply shocks dovetail 'nicely'.

Worth checking out Bloomberg's Odd Lots podcast as they've done a number of episodes on the supply chain over the last year. There are ones specifically focusing on (US) ports, rail roads, and trucking.

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