In Praise of Inflation
In a Reuters interview, Barkin says rising bond yields, inflation expectations are a possible win.
- Richmond Fed: “I am encouraged to see the rise in market indicators of inflation expectations. That is what we are trying to support.” Barkin said he regarded a recent rise in interest rates on Treasury bonds as also part of a “reflation trade,” a sign that investors were factoring future hikes in prices into their decisions by demanding higher interest rates, rather than representing a worrisome tightening of financial conditions.
- St. Louis Fed: “The ingredients for higher inflation are in place,” St. Louis Fed President James Bullard said in separate comments to reporters. “You have very powerful fiscal policy in place and perhaps more to come,” with Democrats now about to control the White House as well as the U.S. Senate and House of Representatives.
- Philadelphia Fed: President Patrick Harker called the early U.S. vaccination figures, with fewer than 5 million inoculated so far, “incredibly disappointing.”
“We are looking at a long period where the fed funds rate will stay at essentially zero,” Harker said. He saw “no signs that inflation is going to go out of control.” - Chicago Fed: President Charles Evans expressed more skepticism about the inflation to come. The boost to inflation from added fiscal spending, he told a bankers group on Thursday, is “not nearly as strong as I would like.” He said he believes inflation won’t reach 2% until 2023, and that it would not be unreasonable for the Fed to wait until mid-2024 before raising short-term rates from their current near-zero levels.
- San Francisco Fed: President Mary Daly, in an event Thursday put on by the Manhattan Institute’s Shadow Open Market Committee, said she believes a stronger labor market will eventually give rise to higher inflation, though the upward push on prices from a tight job market is likely weaker than it was in the past, making a sudden surge unlikely.
At the same time, Daly said she was reassured by a recovery in inflation expectations, which showed market participants, households and businesses are beginning to believe the Fed will deliver on its aim to overshoot 2% inflation.
Overshoot Inflation
If these market manipulators actually understood markets, they would realize they already overshot their 2% inflation target.
They don’t see it because they don’t know where to look and are clueless about what inflation really is.
Inflation is rampant in home prices and asset prices in general. Speculation in equites and Bitcoin is massive.
Medical inflation is undercounted.
Speculation Rampant
Tesla
Bitcoin
Margin Debt
The Fed does not see any of this because they have never spotted a bubble in real time and never will.
Mish
Five FED presidents praise financial fraud.
In 2004, the FBI warned congress of massive mortgage fraud. In 2005, Greenspan praised bankers for getting people into homes they otherwise could not afford.
Greenspan was praising massive mortgage fraud, which allowed people to get into homes they could not afford. After the housing bust, Greenspan pretended to lament that he thought the bankers would have been more responsible. Greenspan encouraged the irresponsibility with his taking of lending standards to ZERO.
Bernanke followed up by pretending, after he left office, that he lamented he had not referred any bankers.
Stable prices means no change. That is the FED’s mandate. 2% inflation is not stable prices. How can five FED presidents cheer violating their mandate of stable prices? It is all so phony.
Targeting inflation is a strange policy:
Doing something to encourage spending to cause prices to rise, when rising prices will discourage spending.
All of the central banks have the same strategy which is to -credibly- commit to future inflation, in order to restart private sector credit expansion. So we are about to test this statement “There is no means of avoiding the final collapse of a boom brought about by credit expansion.” and the sad fact for the USA, is that there was no global savings glut, there was only a massive expansion of credit internally driving a boom in other countries.
There doesn’t seem to be any adequate consideration of a collective belief in inflation which -is not- accompanied by an expansion in private sector debt. Entrepeneurs believe they have a product or service and deal with interest rates, its not the interest rates driving entrepeneurs. Perhaps you could argue at extreme lows that various tech ideas are worth a punt, but not generally. Which only leaves a resurgence in housing or cars.
Its not just Federal administrators wanting to push the inflation narrative, its BoE BoJ all of them, because all are scared of the deflationary collapse.
I don’t personally believe there ever was a balanced way to recover from 2007/8 which is whats going on, and given the democrats are sending 2K cheques out (because there is no inflation yet) then the USA will eventually face a very harsh reality. The risk for the USA is that a market collapse this year, inflation taking over is going to be one shock too many and the population at large will be seduced, as they already appear to be, by the siren call of socialism.
Biden says he will spend TRILLIONS to stimulate the economy. New boss same as the old boss. Hahahaaaaaaaa!!!
Long BTC, gold and silver. Regarding stocks, I just hope I start getting out as the I see the political and economic chaos increasing. Sure is going to be interesting to see what economic stimulus “The Squad” is pushing to Pelosi, Schumer and Biden. (Eyes rolling)
Congratulations! You live in China and didn’t even know it!!!
Tesla Close 880.02; 52 week range 70.10 – 884.49; PE Ratio 1,682.64; Forward dividend and Yield N/A; 1 Year target 450.87.
Looks like an all in signal to who?
Similar to The South Sea Bubble.
I’m confused by your stance@[Mish Editor] . Where is this inflation coming from?
At night… they have those dreams.
It’s the only way to neutralize our debt that the Fed has left. Paying it down is impossible at these levels. They will just try to keep inflation in general goods and services to around 5-6% but that will be hard. I remember what it was like in the late 70’s with inflation that went up over 10%. It was not fun at all and the Volker recession afterwards was very bad too. Unemployment went over 10%. Buy real assets that produce cash flows, wait for the Fed to finally raise rates and then buy long bonds like crazy. Are our collective leaders actually incompetent or is that only my impression?
“Pay no attention to the man behind the curtain”
FED members know very well that present debt levels are at historical highs, and rising yields may actually mean a fear of defaults or creditworthiness of loan applicants has crept in. Those two forces in the bond market are DEFLATIONARY because they result in net reduction of credit.
The Fed knows exactly what they are doing. Transferring assets from the poor to the rich. Everything they are doing makes perfect sense if the goal is to enrich the elite at the expense of everyone else.
They are following the mandate of their owners. Protect banks at all costs this other mandate for inflation and employment is just a bunch of nonsense made up to make us feel like they are really trying to do something!
There are batting 1000 when it comes to their true mandate!
Inflation Truthers https://awealthofcommonsense.com/2021/01/inflation-truthers/
Even though the inflation trade is on, I’m doubting a deflationary smack down will be avoided. Washington (Fed + Congress + POTUS) will not get all of the money helicopters in the air UNTIL the next crisis hits. When assets crash, laws will then be thrown out the window by the Dems and ball-less Reps, and it’ll be true printing like we have never seen before (in the US), with checks to households every month.
Does anyone really believe the level or duration of inflation necessary to dent the debt levels won’t result in major social dislocation?
Just think if the next time people storm the Capitol its down to policy mistakes. In one way this week was. Why, because if proper policies to promote solid prosperity had been in place from Clinton onwards Trump would never have happened. He would have been laughed out therace 4 years back.
Greenspan and his old have a lot to answer for.
He would have been laughed out of the race 4 years back.
Greenspan and his ilk have a lot to answer for.
I guess they aren’t worried about the falling dollar either as that will help by pushing up import prices.
There is only one unadvertised mandate the the Fed really has, which is to enhance the power and control of the member institutions. Framed that way, one can see that the moves and decisions are a means to an end, not a century of ignoramuses bumbling their way through the work day.
I disagree with only one point…and that’s which is more important. Changing systems is difficult and, in my view, fairly unlikely. Make no mistake, it’s my own bacon I’m most interested in saving.
Totally agree it is fairly unlikely to change the system. I also think it’ll be unlikely for one to succeed in saving their bacon in what appears to be a rigged game, yet some visit these types of sites to try and play the game more optimally 🙂
Not surprising they’re patting themselves on the back…..They’ve been trying for years to overcome massive macro forces to make this happen…..and who would have thought?……Bernnanke was right……all it takes is helicopter money.
My strategy has been for a very long time….. to try to take advantage of inflation….it has been the preferred policy all along. I quit trying to fight the Fed a long time ago. I was just worried deflation would win.
This policy has nothing to do with the Fed’s stated dual mandate of full employment and maintaining stability fo the financial system…it’s just about deflating away all the debt. Now debt is very high….and only high inflation can make the debt manageable.
I don’t argue with Mish or anybody else who criticizes the Fed. But at the end of the day, we’re pawns in their game. Failure to anticipate and plan for inflation is on us….because we’re the ones who pay if we fail to plan for it.
Yep, we ain’t seen nothin yet in the way of asset inflation. That being said Covid mutations, civil unrest, and poorly targeted helicopter money may cause some major temporary blips, IE asset buying opportunities.
The fed loves inflation. Wage workers and savers be damned. But remember, stay productive.
They don’t seem to mind broadcasting that they want the cost of living to go up for everyone.
To get people to spend and try to increase velocity.
Ha ha, great plan. Spend next years wages now before prices go up.
We’re in the midst of the biggest bubble ever which will have the biggest pop ever.
I was speaking to a pal regarding this. The best part is that the Democrats will own this ALL lock, stock and barrel. I have “yet” to hear anything they propose for the economy. All I read today is that Biden says we must spend “trillions.” Brrrrrrrrr.