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I understand the fears of inflation because of the additional money printing the fed has been up to, but what I think everyone is missing is that this time arou

I understand the fears of inflation because of the additional money printing the fed has been up to, but what I think everyone is missing is that this time around, everyone around the world is also printing money. As long as eventually the economy gets up and running, the relative demand and value of dollar should stabilize.

erentz 6y ago
Value of dollar may remain fairly stable relative to other currencies but not necessarily to assets and commodities.
sobellian 6y ago
Also, the money is not printed in a vacuum. We are in the midst of a terrible economic crisis. If the downturn becomes much worse we will need to contend with deflation rather than inflation above and beyond the 2% target. These are basic principles of an elastic money supply.
nugget 6y ago
I'm less concerned about inflation between currencies and more concerned about the "hyperinflation" of financial assets due to ZIRP, low debt yields, and extreme multiple expansion for equity. In particular, I'm curious about the domestic political consequences: if financial assets are inflated to the point where you can only tap a 1% yield in retirement (versus the 3-4% today), what does the typical middle/upper middle class family do? What happens to newcomers in the FIRE movement? High housing costs can be escaped by moving to a LCOL area, but if/when the idea of a privately-funded retirement floats out of reach, how does the overall electorate respond?
- Ancalagon 6y ago
  No pensions, no (worthwhile) 401k's. We all become indentured servants renting for the rest of our lives.
- yourapostasy 6y ago
  > ...if/when the idea of a privately-funded retirement floats out of reach, how does the overall electorate respond? In a way this has already started to happen in lower socio-economic strata: they decouple as best they can. This is why you see such a large correlation between the "unbanked" and those strata. Currently, most individuals in those strata lack the education and information to learn how to decouple in more areas of their lives. The information part is slowly being addressed by the proliferation of the Net, and it is even slower now with social networks (which retard the growth of structured and systematic information sharing). The education part is even slower to change, but it is changing. It is now socially acceptable to openly discuss the value of college/university education, where that used to be unthinkable just a decade ago. That opens the door to alternatives. The rational response is decoupling from norms in real estate, insurance (especially healthcare in the US), finance, and education, and establishing alternatives with like-minded people who determined they're simply too poor to participate in the "accepted" norms (the notion that those "mainstream" norms have priced themselves out of their markets is still heresy). In a Japan-evocative ZIRP environment, being a millionaire per individual in a family is no longer sufficient, "lean" FIRE/normal-retirement plans would need to re-calibrate to deca-millionaire. If equities start yielding 1%, the SWR would drop to around 0.5%, and $10M USD would yield only about $50K per year, a huge chunk of which goes to those "mainstream" norms. At these kind of numbers, we're talking about people with both education and information, and they'll start to make and share decisions, and iterate solutions, in a different manner than previously-affected strata. Hard to say what the iterative ramifications are of people switching to alternatives. A sharp bifurcation just like envisioned in dystopian cyberpunk scifi is arguably imaginable, with megacorps and an underground, and a financial no-man's-land in-between. So is a demographic implosion-based hyper-depression: children are simply flat-out impossible to afford at some point for the majority, and they respond appropriately; vast segments of our modern economic civilization utterly dependent upon an implicit constant population growth run into a sudden reversal. More positive outcomes are also possible. Co-ops, on-site recycling, permaculture, local currency, DIY medicine, automation, land trusts, etc., blended into what works for each group's idiosyncrasies, and decoupling from the mainstream mores and indebtedness expectations to yield a good enough solution for them. They're poor in mainstream capital, but readily acknowledge they'll statistically never acquire massive amounts of it anyways, and enrich themselves in other forms of capital through other means of exchange, and have accepted the trade-off.
sirmoveon 6y ago
The fear right now is for deflation rather. The fed printing money will just weaken the dollar relative to other currencies as you point out. Which might end up being convenient for the US economy, but it comes at the risk of the world going away from the Dollar as a reserve currency as Goldman warns.

erentz 6y ago

Value of dollar may remain fairly stable relative to other currencies but not necessarily to assets and commodities.

sobellian 6y ago

Also, the money is not printed in a vacuum. We are in the midst of a terrible economic crisis. If the downturn becomes much worse we will need to contend with deflation rather than inflation above and beyond the 2% target. These are basic principles of an elastic money supply.

nugget 6y ago

I'm less concerned about inflation between currencies and more concerned about the "hyperinflation" of financial assets due to ZIRP, low debt yields, and extreme multiple expansion for equity. In particular, I'm curious about the domestic political consequences: if financial assets are inflated to the point where you can only tap a 1% yield in retirement (versus the 3-4% today), what does the typical middle/upper middle class family do? What happens to newcomers in the FIRE movement? High housing costs can be escaped by moving to a LCOL area, but if/when the idea of a privately-funded retirement floats out of reach, how does the overall electorate respond?

Ancalagon 6y ago
No pensions, no (worthwhile) 401k's. We all become indentured servants renting for the rest of our lives.
yourapostasy 6y ago
> ...if/when the idea of a privately-funded retirement floats out of reach, how does the overall electorate respond? In a way this has already started to happen in lower socio-economic strata: they decouple as best they can. This is why you see such a large correlation between the "unbanked" and those strata. Currently, most individuals in those strata lack the education and information to learn how to decouple in more areas of their lives. The information part is slowly being addressed by the proliferation of the Net, and it is even slower now with social networks (which retard the growth of structured and systematic information sharing). The education part is even slower to change, but it is changing. It is now socially acceptable to openly discuss the value of college/university education, where that used to be unthinkable just a decade ago. That opens the door to alternatives. The rational response is decoupling from norms in real estate, insurance (especially healthcare in the US), finance, and education, and establishing alternatives with like-minded people who determined they're simply too poor to participate in the "accepted" norms (the notion that those "mainstream" norms have priced themselves out of their markets is still heresy). In a Japan-evocative ZIRP environment, being a millionaire per individual in a family is no longer sufficient, "lean" FIRE/normal-retirement plans would need to re-calibrate to deca-millionaire. If equities start yielding 1%, the SWR would drop to around 0.5%, and $10M USD would yield only about $50K per year, a huge chunk of which goes to those "mainstream" norms. At these kind of numbers, we're talking about people with both education and information, and they'll start to make and share decisions, and iterate solutions, in a different manner than previously-affected strata. Hard to say what the iterative ramifications are of people switching to alternatives. A sharp bifurcation just like envisioned in dystopian cyberpunk scifi is arguably imaginable, with megacorps and an underground, and a financial no-man's-land in-between. So is a demographic implosion-based hyper-depression: children are simply flat-out impossible to afford at some point for the majority, and they respond appropriately; vast segments of our modern economic civilization utterly dependent upon an implicit constant population growth run into a sudden reversal. More positive outcomes are also possible. Co-ops, on-site recycling, permaculture, local currency, DIY medicine, automation, land trusts, etc., blended into what works for each group's idiosyncrasies, and decoupling from the mainstream mores and indebtedness expectations to yield a good enough solution for them. They're poor in mainstream capital, but readily acknowledge they'll statistically never acquire massive amounts of it anyways, and enrich themselves in other forms of capital through other means of exchange, and have accepted the trade-off.

sirmoveon 6y ago

The fear right now is for deflation rather. The fed printing money will just weaken the dollar relative to other currencies as you point out. Which might end up being convenient for the US economy, but it comes at the risk of the world going away from the Dollar as a reserve currency as Goldman warns.