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Inflation hysteria. Ask yourself how much of current inflation is speculative (eg. Blackrock buying single-family homes, Glencore buying copper, Zhongda Group

Inflation hysteria. Ask yourself how much of current inflation is speculative (eg. Blackrock buying single-family homes, Glencore buying copper, Zhongda Group buying aluminum). Now ask yourself what these folks are doing as they watch Fed reserve rates climb, reverse-repos skyrocket, PBOC/CCP order reduced commodity speculation, and 4 months of declining US home sales, falling lumber prices. The inflation shock is/was temporary and could well be followed by a deflationary shock if the powers that be overreach (as they usually do). Lead-times on goods remain long. This induced reversion to the mean won't happen overnight, but I believe it is well under way.

deleted 5y ago
[deleted]
fny 5y ago
So yes, there is a huge transitory supply shock that's inflationary. At the same time, there are structural labor and energy issues that in my view will contribute to longer term price strains but not of the 70s variety.
yks 5y ago
> Inflation hysteria. And it doesn’t help that there is a strong financial incentive in spreading inflation fears now.
- AnimalMuppet 5y ago
  Do tell. What are the strong financial incentives, and who has them?
  - yks 5y ago
    Advertising cryptocurrency as a "hedge against the imminent inflation" helps the holders of a given cryptocurrency to increase the value of their holding.
    - AnimalMuppet 5y ago
      Ah, I see. Yes, it does. (Ditto for holders of gold, but that's nothing new.)
dwhitney 5y ago
The debt to gdp ratio is higher than it’s ever been. https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S I don’t see us cutting back spending any time soon, so it doesn’t seem crazy to me that we inflate our way out of this, especially since after this pandemic a lot of countries are in a similar situation, making inflation more politically viable
- lumost 5y ago
  From a practical perspective, doesn't inflation naturally destroy large capital accumulations and debts? From a policy perspective this would seem like a viable remedy to the current extreme income inequality and debt burden.
  - ComputerGuru 5y ago
    Only if wages rise accordingly. There is some sign it may happen given the still-high levels of unemployment combined with companies actively seeking workers, but it’s too soon to really tell.
  - trts 5y ago
    Assets like housing and land have certain intrinsic value to them. The intrinsic value doesn't change because the amount of money circulating doubles, but the price of the asset in the inflated currency rises. Since wealthy people hold more of their wealth in assets, this insulates them from inflation more than those who hold their wealth in savings or who live paycheck to paycheck and see their cost of living increase. On paper it does reduce the burden of certain debts, but people on the lower socioeconomic end of the spectrum are often already paying debts at much higher or variable interest rates.
    - machinebun 5y ago
      It's a complicated relationship. The prices of assets are related to the price of debt (the cheaper the debt, the more expensive the asset). Housing is an asset that pays a coupon (rent), so it acts a bit like a bond. Bonds have been riding the coattails of decreasing interest rates for the last 40 years - if interest rates increase then stocks, houses, bonds etc are going to deflate. While inflation with low interest rates might increase the value of assets - inflation that leads to higher interest rates might actually do the opposite. So it ends up being a choice of the central bank which way to push this thing (although there is a lean towards keeping interest rates lower for longer because of the size of the U.S. government debt interest payments)
Consultant32452 5y ago
Interest rates can never be normalized because we can't afford the interest on our debt. That's going to continue to distort the market for the foreseeable future. Blackrock etc. will get bailed with your money when their speculation fails. Everything is a mess and I'm having a hard time figuring out what are the reasonable investment options available to an average person like myself.
- swader999 5y ago
  Gardening.
  - deleted 5y ago
    [deleted]
- twiddling 5y ago
  A well balanced portfolio across 16 asset classes with a strategy based on your short and long term goals. Don't invest in single issues (idiosyncratic risk ) and have someone else do it for you if you're too personally involved.
macinjosh 5y ago
The Fed pumped almost $6 trillion into the money supply. That is 3 times more than was done for the 2008 crash. I do not think it is hysterical (which is loaded and gendered term, btw) to worry about the impact that could have on the value of my hard earned savings.
- tomComb 5y ago
  But they are not using it in a gendered way, and doesn't that actually help us recover a term that has legitimate uses?
- howmayiannoyyou 5y ago
  Deposits are liabilities for banks and much of the injected money has found its way back into the Fed's balance sheet, exchanged for Treasuries the banks need(ed) to maintain collateral requirements (offset deposit liabilities). It may have made passes through the 'normal' economy, but is now caught in a repo loop that has little to a negative impact on velocity, but is inflation negative.
deregulateMed 5y ago
These type of "Yes men" are going to be the ones hurt the most for going along with the script.

deleted 5y ago

[deleted]

fny 5y ago

So yes, there is a huge transitory supply shock that's inflationary. At the same time, there are structural labor and energy issues that in my view will contribute to longer term price strains but not of the 70s variety.

yks 5y ago

> Inflation hysteria. And it doesn’t help that there is a strong financial incentive in spreading inflation fears now.

AnimalMuppet 5y ago
Do tell. What are the strong financial incentives, and who has them?
- yks 5y ago
  Advertising cryptocurrency as a "hedge against the imminent inflation" helps the holders of a given cryptocurrency to increase the value of their holding.
  - AnimalMuppet 5y ago
    Ah, I see. Yes, it does. (Ditto for holders of gold, but that's nothing new.)

dwhitney 5y ago

The debt to gdp ratio is higher than it’s ever been. https://fred.stlouisfed.org/series/GFDEGDQ188S https://fred.stlouisfed.org/series/GFDEGDQ188S I don’t see us cutting back spending any time soon, so it doesn’t seem crazy to me that we inflate our way out of this, especially since after this pandemic a lot of countries are in a similar situation, making inflation more politically viable

lumost 5y ago
From a practical perspective, doesn't inflation naturally destroy large capital accumulations and debts? From a policy perspective this would seem like a viable remedy to the current extreme income inequality and debt burden.
- ComputerGuru 5y ago
  Only if wages rise accordingly. There is some sign it may happen given the still-high levels of unemployment combined with companies actively seeking workers, but it’s too soon to really tell.
- trts 5y ago
  Assets like housing and land have certain intrinsic value to them. The intrinsic value doesn't change because the amount of money circulating doubles, but the price of the asset in the inflated currency rises. Since wealthy people hold more of their wealth in assets, this insulates them from inflation more than those who hold their wealth in savings or who live paycheck to paycheck and see their cost of living increase. On paper it does reduce the burden of certain debts, but people on the lower socioeconomic end of the spectrum are often already paying debts at much higher or variable interest rates.
  - machinebun 5y ago
    It's a complicated relationship. The prices of assets are related to the price of debt (the cheaper the debt, the more expensive the asset). Housing is an asset that pays a coupon (rent), so it acts a bit like a bond. Bonds have been riding the coattails of decreasing interest rates for the last 40 years - if interest rates increase then stocks, houses, bonds etc are going to deflate. While inflation with low interest rates might increase the value of assets - inflation that leads to higher interest rates might actually do the opposite. So it ends up being a choice of the central bank which way to push this thing (although there is a lean towards keeping interest rates lower for longer because of the size of the U.S. government debt interest payments)

Consultant32452 5y ago

Interest rates can never be normalized because we can't afford the interest on our debt. That's going to continue to distort the market for the foreseeable future. Blackrock etc. will get bailed with your money when their speculation fails. Everything is a mess and I'm having a hard time figuring out what are the reasonable investment options available to an average person like myself.

swader999 5y ago
Gardening.
- deleted 5y ago
  [deleted]
twiddling 5y ago
A well balanced portfolio across 16 asset classes with a strategy based on your short and long term goals. Don't invest in single issues (idiosyncratic risk ) and have someone else do it for you if you're too personally involved.

macinjosh 5y ago

The Fed pumped almost $6 trillion into the money supply. That is 3 times more than was done for the 2008 crash. I do not think it is hysterical (which is loaded and gendered term, btw) to worry about the impact that could have on the value of my hard earned savings.

tomComb 5y ago
But they are not using it in a gendered way, and doesn't that actually help us recover a term that has legitimate uses?
howmayiannoyyou 5y ago
Deposits are liabilities for banks and much of the injected money has found its way back into the Fed's balance sheet, exchanged for Treasuries the banks need(ed) to maintain collateral requirements (offset deposit liabilities). It may have made passes through the 'normal' economy, but is now caught in a repo loop that has little to a negative impact on velocity, but is inflation negative.

deregulateMed 5y ago

These type of "Yes men" are going to be the ones hurt the most for going along with the script.