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Inflation Then Bubble Bust Deflation: A Video With Daniel Lacalle

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12 comments on Inflation Then Bubble Bust Deflation: A Video With Daniel Lacalle

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Daniel Lacalle and I discuss Austrian economics, central bank policy, errors by the Fed and ECB, whether or not the inflation is transitory, bank lending, QE, and numerous other topics but not politics in a 1 hour video.

Yes, it’s lengthy but we cover a lot of ground. I have followed Lacalle,@dlacalle_IA, on Twitter for years. 

The Fed via asset bubble blowing and encouragement of more unproductive debt has blown another big bubble. When it bursts, the result will be anything but inflationary.

Feedback

Let’s compare actions by the Bank of China to the Fed.

I specifically note financial repression echoing the sentiment of Michael Pettis in my post The Fed and the Bank of China Both Act to Punish Savers.

Mish

 

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Thanks for Tuning In!

Mish

Mike Shedlock

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12 Comments
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Scooot
Scooot
4 years ago
Hi Mish,
I’ve just watched it thanks, and thought it was very good.
You discussed an example of negative yielding Greek bonds being in a clear bubble because of QE and that natural buyers would be at much higher yields if it wasn’t for QE. Yet you quite fancied long US Treasuries which are also at artificially low yields and in a bubble because of QE. I understand you’re not advocating holding them to maturity and only for a possible short term capital appreciation but it seems a bit of a contradiction nevertheless? 
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Casual_Observer
Casual_Observer
4 years ago

The market is not reflecting the meager economy on main street. At some point it will. Rates will have to rise. Inflation is running hot because prices are connected more to trader speculation in all commodities.  The market is out of sync with the economy as it almost always is.

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dtj
dtj
4 years ago
No such thing as deflation (in terms of the dollar) when there’s a printing press. The bubble got popped last March and it was solved with a printing press. Here we are a year later, prices higher than ever.
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Johnson1
Johnson1
4 years ago
Reply to  dtj

Exaxtly. Deflation on the average over the 50 years lasts only 3 quarters.  You have a very short time to buy low before you can sell high😉

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Mackkenzie
Mackkenzie
4 years ago
Central bankers are acting rationally. There really isn’t any way to “fix” the problems. They can either let the system correct itself, flushing out mal-investments and bad debt, or they can kick the can down the road, which actually makes the mal-investments and bad debt even worse. The problem is that whoever is in charge when the system implodes winds up getting blamed for the mess and there goes their career and reputation. It is only natural to delay and let someone else deal with the mess once you’ve moved on.
It’s the same reason a drug addict is reluctant to give up the habit. The pain of withdrawal is unpleasant. And when the global economic withdrawal process is likely to be measured in decades, considering how bad things have gotten, no policy maker wants to be the one presiding over it.
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caradoc-again
caradoc-again
4 years ago
Reply to  Mackkenzie
Politics might ultimately force a solution, when extremism becomes the norm leading to conflict. History won’t repeat but might rhyme with something similar to communism and fascism rising with similar outcomes. TBD. A few years off.
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Maximus_Minimus
Maximus_Minimus
4 years ago
Reply to  Mackkenzie
That would imply a conscious deliberate cover up of the mess, or at least willful ignorance.
I am not sure the ruling class has come to mass realization of the stark reality…yet.
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Maximus_Minimus
Maximus_Minimus
4 years ago
“Are they this dense or is there something else going on?” Excellent question.
The other question is: What the heck is the end game, other than kicking the ball down the road? Waiting for eruption of the Yellowstone volcano, or WW3?
If memory serves, the prez of Boston FED Rosengren seemed shocked by runaway building activity in his home town, and turned hawkish, but that was before black swan called pandemic. You must be thick when you see a forest of cranes, and not link it to your policies.
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kiers
kiers
4 years ago
Reply to  Maximus_Minimus
well, there is the one side effect: China has allegedly stopped buying Treasuries.  USTs have become that unpalatable.
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Eddie_T
Eddie_T
4 years ago
I averaged down my silver trade one last time today. I wasn’t going to, but I like the way the metals are ignoring the red day in stocks. And the way they’re no longer being driven down much by the rise in the dollar. It feels like a bottom to me. I could be wrong. Next week will be interesting.
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Eddie_T
Eddie_T
4 years ago
Very cool. I’m watching it at work between patients. It’s Friday afternoon, and I need some good economic intel to make it to 5 o’clock.
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Eddie_T
Eddie_T
4 years ago
Reply to  Eddie_T
They (the central banks) aren’t dense. They’re willfully ignoring the obvious. I like that term Daniel used……they have a “perverse incentive” to ignore the elephant in the room.
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