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Inflation can be represented not only in the prices of consumer goods and labor costs, but also in asset prices.
The structure of currency markets, developing markets and international trade is completely different than it was in 1973-74.
Weimar Republic and Zimbabwe comparisons to the US reveal ignorance: that the economic and military strength of the countries involved matter, and specifically when the country issues the world's reserve currency. It does not mean it can never change (it can), but we are not even close to being unseated. Communist China is a threat, but today the whole world has awaken to that fact. Expect the pendulum to swing, my friends.
In summary, predictions about acceleration of inflation are close to worthless.
I will venture a prediction: that interest rates will keep rising possibly through early 2022, and this may cause a very large reset in stock prices relative to bonds as investors find higher yields for less risk.
Agree on all points. My view is that market returns will be subject to the competing forces of increased demand and rising interest rates. Equity returns may be flat or muted or turn negative even. Though I think increased demand will beat rising interest rates, muting returns, but not turning them negative or even flat.
An interesting takeaway here is that the FED is not wholly in control of rates. Mr Market still has his say. And yes, I believe that the current risk-on environment could be impacted if FI investors are offered safe and attractive low-risk opportunities.
When you see interest rates at 1-month, 3-month, 6-month, and 1-year pegged at zero each day, it's difficult to say that they're not in control. Today may have been a case of too much supply, and the stock market fell in order to stoke demand for the debt. Primary dealers are currently obligated to meet regulatory requirements by the end of the month that limit their holdings of treasuries and their ability to absorb new supply.
When you see interest rates at 1-month, 3-month, 6-month, and 1-year pegged at zero each day, it's difficult to say that they're not in control. Today may have been a case of too much supply, and the stock market fell in order to stoke demand for the debt. Primary dealers are currently obligated to meet regulatory requirements by the end of the month that limit their holdings of treasuries and their ability to absorb new supply.
They have some (much?) control, but moreso on the short end of the curve. And let us not forget that bonds are auctioned, so rates can be controlled by potential buyers.
If there were no buyers for new 10-year debt at 1.6%, what do you suppose would happen? Considering that we are running trillion dollar plus annual deficits and issuing debt accordingly.
The FED mainly controls overnight lending (LIBOR), longer term debt is determined at auction. The FED has not raised rates in a very long time and the 10-year is up over 100% since 3/20/2020 (.82 to 1.69).
They have some (much?) control, but moreso on the short end of the curve. And let us not forget that bonds are auctioned, so rates can be controlled by potential buyers.
If there were no buyers for new 10-year debt at 1.6%, what do you suppose would happen? Considering that we are running trillion dollar plus annual deficits and issuing debt accordingly.
The FED mainly controls overnight lending (LIBOR), longer term debt is determined at auction. The FED has not raised rates in a very long time and the 10-year is up over 100% since 3/20/2020 (.82 to 1.69).
It seems to me you know this but to be clear for others LIBOR = London Interbank Offered Rate which impacts bank to bank rates out to a few months.......The Federal Reserve has nothing, at least directly, to do with LIBOR. Overnight lending in The US yields the EFFR (Effective Federal Funds Rate) which The NY Fed. publishes the next day. Last night EFFR was 0.07% inside the target of 0.0% - 0.25%. and for several months EFFR has been between 0.07 and 0.10%.
FWIIW LIBOR is being phased out as it was gamed a number of times.
When you see interest rates at 1-month, 3-month, 6-month, and 1-year pegged at zero each day, it's difficult to say that they're not in control. Today may have been a case of too much supply, and the stock market fell in order to stoke demand for the debt. Primary dealers are currently obligated to meet regulatory requirements by the end of the month that limit their holdings of treasuries and their ability to absorb new supply.
The rates you are talking about are not pegged at zero - that's just not how it works. The Fed., "implies" a target range which right now is 0.00% - 0.25% as noted above EFFR last night was 0.07%.
It seems to me you know this but to be clear for others LIBOR = London Interbank Offered Rate which impacts bank to bank rates out to a few months.......The Federal Reserve has nothing, at least directly, to do with LIBOR. Overnight lending in The US yields the EFFR (Effective Federal Funds Rate) which The NY Fed. publishes the next day. Last night EFFR was 0.07% inside the target of 0.0% - 0.25%. and for several months EFFR has been between 0.07 and 0.10%.
FWIIW LIBOR is being phased out as it was gamed a number of times.
What is your prediction for inflation? I'm just old enough to remember how inflation was conquered in the early 80's with 20% interest rates. That caused a recession and 10% unemployment. Some people say we never fully recovered from that.
Economists says inflation risks highest in two decades and could force Fed to raise interest rates in 2022 https://www.marketwatch.com/story/ec...22-11616426962
Larry Lizard is pretty pessimistic:
Larry Summers, who called out inflation fears with Biden's $1.9 trillion COVID-19 relief package, says the US is seeing 'least responsible' macroeconomic policy in 40 years https://www.businessinsider.com/larr...-relief-2021-3
There SHOULD be inflation, after so many years of artificially holding down interest rates to the point that people get a negative return on their savings.
I think the thing is that inflation & rising interest rates be gradual, and small. I read an expert who said looks like 2021 will hold steady, with small rises next year. Things are in control.
The $1.9 Trillion stimulus/relief bill contains stimulus, so it's designed to help the economy. Already we're seeing a decline in unemployment rates.
Too bad the pandemic wasn't properly handled last year with a national plan and all-out testing so it could be contained. Once again, a Democratic President is left to fix the mess the prior Republican President left behind. I'm sure we all hope he's successful. The Democrats have a pretty good track record with that; they've certainly had a lot of experience at it. Time will tell.
There SHOULD be inflation, after so many years of artificially holding down interest rates to the point that people get a negative return on their savings.
I think the thing is that inflation & rising interest rates be gradual, and small. I read an expert who said looks like 2021 will hold steady, with small rises next year. Things are in control.
The $1.9 Trillion stimulus/relief bill contains stimulus, so it's designed to help the economy. Already we're seeing a decline in unemployment rates.
Too bad the pandemic wasn't properly handled last year with a national plan and all-out testing so it could be contained. Once again, a Democratic President is left to fix the mess the prior Republican President left behind. I'm sure we all hope he's successful. The Democrats have a pretty good track record with that; they've certainly had a lot of experience at it. Time will tell.
Wow. We have an 24x7 MSNBC watcher in the house!
1. Except for brief flashes in time normal little guy savings instruments have been yoy losers net of inflation and taxes since the '50s. IOW, "people get a negative return on their savings" normally.
2. The CDC wrecked any hope of using widespread testing to get ahead of CV-19 last Feb. and March....Trump had nothing to do with that.
3. Speaking of messes you might recall what Nixon, Reagan and Bush II inherited from your party of choice.
2. The CDC wrecked any hope of using widespread testing to get ahead of CV-19 last Feb. and March....Trump had nothing to do with that.
...
From a purely organizational perspective, isn't the CDC a government body that takes it's marching orders from the top? Doesn't the buck stop here among those who value personal responsibility?
The CDC is mainly a scientific organization. As far as I know they have no mandate to set greater policy or design, manufacture or distribute testing.
As a scientific entity they would follow the scientific method: Form a hypothesis, or testable explanation. Make a prediction based on the hypothesis. Test the prediction. Iterate: use the results to make new hypotheses or predictions. Which is a feedback loop that assumes errors, incorrect hypothesis and the discovery of new information.
I am certain they made mistakes, maybe a lot, but making them the scapegoat seems to ignore their limited role. Hard pressed to see CDC could have arranged "widespread testing" without an all-hands-on-deck government initiative, which is not within their sphere of influence.
There is plenty of blame that could be assigned for perceived failures. It is not mutually exclusive. Still, a bad day in America when we start laying the burden of policy failures on our scientific community, rather than the politicians that beg for our faith, trust and votes.
From a purely organizational perspective, isn't the CDC a government body that takes it's marching orders from the top? Doesn't the buck stop here among those who value personal responsibility?
The CDC is mainly a scientific organization. As far as I know they have no mandate to set greater policy or design, manufacture or distribute testing.
As a scientific entity they would follow the scientific method: Form a hypothesis, or testable explanation. Make a prediction based on the hypothesis. Test the prediction. Iterate: use the results to make new hypotheses or predictions. Which is a feedback loop that assumes errors, incorrect hypothesis and the discovery of new information.
I am certain they made mistakes, maybe a lot, but making them the scapegoat seems to ignore their limited role. Hard pressed to see CDC could have arranged "widespread testing" without an all-hands-on-deck government initiative, which is not within their sphere of influence.
There is plenty of blame that could be assigned for perceived failures. It is not mutually exclusive. Still, a bad day in America when we start laying the burden of policy failures on our scientific community, rather than the politicians that beg for our faith, trust and votes.
The CDC had an early pivotal role and blew it 100% and also tried to shut out early tests like from The University of Nebraska and others.
By the time all that was cleared up it was too late in the game for widespread testing to have helped a lot. Note we still aren't widely testing......are you blaming Biden for that?
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Are you giving Biden a pass for the current border surge? After all he's the boss?
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