The Death of Inflation

[HITTGrapevine]

A dollar can only come into existence as debt. The Fed is quickly becoming the buyer of only resort for the treasuries they create . When the Fed prints treasuries and they buy those treasuries back with dollars providing liquidity to the system that is called monetizing the debt. Treasuries become an asset on the Fed's balance sheet and a liability on governments balance sheet. If you or I were to print money they would call it counterfeiting and throw us in jail. The Fed has no liabilities explain how the Fed can lose? It's a bizzaro world where $1900000000000 can be printed into existence and somehow that can be justified as deflationary.

Re: Printing money. Agreed. Stimulus out the ass to keep the short-term economy rolling, then wait to see what the fallout is.
Question for economists on AV:
What happens when number of dollars circulating in the US economy increases by 1.9T?
Doesn't the value or purchasing power of each dollar become diminished?
That's the classic definition of inflation. isn't it?
We're already seeing the value of money declining, aren't we? How else to explain ultra low borrowing costs, rising equity prices, global demand for commodities, questionable investments in zombie companies that produce nothing except fairy dust, growth in SPACs that are looking for positions in anything, rising land prices and an overheated real estate market in the middle of a global pandemic.
Agree with Errol on the fact that Fed has limited remaining ability to control inflation by adjusting rates. They'll probably try in the coming months and years, but the stock markets will scream bloody murder and concerns over loan and mortgage defaults will grow louder and louder if the Fed is too aggressive.
Seems to me that when inflationary concerns become loud enough, investors will look more aggressively for safe havens. Blue chip stocks, real estate, houses, land, commodities, cars, art - any tangible asset that has actual value and utility.
Gold might not be considered the safe haven that it once was. Bitcoin and crypto dollars seem to be taking the shine off gold. But given the choice in a hyper inflationary environment, I'd take gold over fairy dust any day.

[farming101]

Some of the money created is not circulating.
Household savings rates are way higher than last year. The funds are likely either parked in a checking account, squirreled away who knows where or invested in some short term GIC


https://betterdwelling.com/canadas-household-savings-rate-plummets-lower-after-government-supports-slow/ https://betterdwelling.com/canadas-household-savings-rate-plummets-lower-after-government-supports-slow/

[ajl]

Despite the hyper printing of money, actual inflation has been very muted in reality. Case in point: we upgraded my wife's car early partially due to a fear of inflation so we have a good used car for sale which is a 2012 Toyota Rav4. Used car prices, the business press said, inflated a lot last year. Well actual experience has been shifting a used car is not proving to be easy. Real estate agent just sent through a new land listing this morning. Granted this is mediocre land as is the other land we farm, and the ask is around what land has been selling for since 2012 in the area. So no inflation there either. (Hope the bank man don't find out) This area is commutable to Edmonton. Fuel prices in Edmonton dropped last week from 1.11 to 1.04 for pump gas. If it wasn't for carbon tax, the price would be even lower. Those screaming inflation with eyes closed may want to open them and check gold and oil right now. The cycle of depression includes the first phase which is inflationary followed by the second phase which is deflationary. We are about to transition from the first to the second now.

[AlbertaFarmer5]

Some of the money created is not circulating.
Household savings rates are way higher than last year. The funds are likely either parked in a checking account, squirreled away who knows where or invested in some short term GIC

The other side, is the insatiable demand for USD in most other parts of the world. They are accumulating them as a hedge against their own inflationary pressures, and to be used in the black market/illegal/ underground economy. We might see the US currency as becoming worth less as compared to other assets, but compared to many banana republic currencies, it is rock solid. The world is bigger than the US.

[HITTGrapevine]

Some of the money created is not circulating.
Household savings rates are way higher than last year. The funds are likely either parked in a checking account, squirreled away who knows where or invested in some short term GIC
[ATTACH]7637[/ATTACH]

https://betterdwelling.com/canadas-household-savings-rate-plummets-lower-after-government-supports-slow/ https://betterdwelling.com/canadas-household-savings-rate-plummets-lower-after-government-supports-slow/

I could be dreaming but I'm pretty sure its all circulating, even savings. Unless we're talking about dollars that are stuffed in mattress or hidden in a coffee can in the back of grandma's cupboard.
Household savings aren't stacks of dollars sitting in a bank vault.
Every dollar saved is recirculated by the banks (loans, mortgages, investments and sometimes worthless mortgage backed securities).
The only money that isn't circulated is cash reserves that banks keep on hand to ensure adequate liquidity. Happy to be corrected if I'm mistaken on this.

[jazz]

Happy to be corrected if I'm mistaken on this.

That spike is basically govt money printed up and hoarded into bank accounts. its not personal savings of any sort. Its all debt just shuffled into personal accounts and if its sitting in a bank account as deposits, eventually down payments, the banks can make loans against it hence the refi and real estate boom we are seeing.

And now that inflation will cause rates to rise which will increase profits for lenders. Insidious.

[furrowtickler]

I could be dreaming but I'm pretty sure its all circulating, even savings. Unless we're talking about dollars that are stuffed in mattress or hidden in a coffee can in the back of grandma's cupboard.
Household savings aren't stacks of dollars sitting in a bank vault.
Every dollar saved is recirculated by the banks (loans, mortgages, investments and sometimes worthless mortgage backed securities).
The only money that isn't circulated is cash reserves that banks keep on hand to ensure adequate liquidity. Happy to be corrected if I'm mistaken on this.

True , and I bet the only uncirculated money is in trust funds in the Cayman Islands and or Panama .... like Justin’s ...

[errolanderson]

Everyone has made great points in this thread . . . .

There is certainly two sides to the inflation / deflation debate. To me, markets really feel look like they are heading to a major crossroads shortly.

David Rosenberg had an interesting article this week suggesting potential ugly inflation heading into spring/summer, then followed by deflation.

Can’t see rates being hiked much, if at all, as it could spell disaster for many sectors. Crazy world, crazy times indeed . . . .

[Hamloc]

Despite the hyper printing of money, actual inflation has been very muted in reality. Case in point: we upgraded my wife's car early partially due to a fear of inflation so we have a good used car for sale which is a 2012 Toyota Rav4. Used car prices, the business press said, inflated a lot last year. Well actual experience has been shifting a used car is not proving to be easy. Real estate agent just sent through a new land listing this morning. Granted this is mediocre land as is the other land we farm, and the ask is around what land has been selling for since 2012 in the area. So no inflation there either. (Hope the bank man don't find out) This area is commutable to Edmonton. Fuel prices in Edmonton dropped last week from 1.11 to 1.04 for pump gas. If it wasn't for carbon tax, the price would be even lower. Those screaming inflation with eyes closed may want to open them and check gold and oil right now. The cycle of depression includes the first phase which is inflationary followed by the second phase which is deflationary. We are about to transition from the first to the second now.

Interesting living in the same province we experience a much different reality. Land here continues upward in price. Most recent quarter in my area, central Alberta east of Red Deer sold for $5000 an acre. Cash rent ranges $100-110 an acre. Lumber going up 3/8 OSB $38 a sheet. My son in law is a machinist, steep increases in steel prices in January. Still in the first phase right now in my opinion.

[macdon02]

Google 3 items.


"Biden 30x30"

The second


"Renewable diesel"

Now look at a soy oil weekly chart

Inflation, per se, might be dead. But the phucking racket created in renewable fuels which procures veg oil at half price of present crude, then extracts $4 of govt credits and sells the end product at market price of refined crude..... will put anyone making less then $250k/yr on the street with a pitchfork. Corruption has gone insane, big oil no longer needs to drill, cue the drilling ban, they make 2x in govt credits over lowest cost procurement, then collect the 3-2-1 crack spread. So if you hate big oil, the green agenda is not for you because Marathon and Valero are at the top the heap and they are looking to kill ethanol. The lobbyist in Washington and Ottawa have earned their keep.

[beaverdam]

Was watching Bloomberg this morning,,, seems everyone forecasting full global economic recovery from covid plus biden spending equals = higher equities and lower commodities. Not just recovery,,, but sooner than expected recovery!

Money exiting commodities, moving to equities.

[errolanderson]

CHINA TIGHTENING MONETARY POLICY: Inflation is the talk-of-the-town these days, but China's recent announcement to tighten monetary policy is a potential blow to global commodity prices heading into spring. China is by far the largest buyer of commodities consuming about 50% of the entire market. This tightening in money policy could also impact credit markets. ProMarket Wire, Calgary

[AlbertaFarmer5]

Was watching Bloomberg this morning,,, seems everyone forecasting full global economic recovery from covid plus biden spending equals = higher equities and lower commodities. Not just recovery,,, but sooner than expected recovery!

Money exiting commodities, moving to equities.

Makes for a good headline.

What kind of recovery doesn't require raw materials?

Are equities so far detached from the real world that they can (continue) to rise unabated without affecting demand for any of the tangible assets used to create things?

Sounds like the service oriented economy has been a roaring success. Primary production is no longer relevant to growth. Amazing.

[beaverdam]

Makes for a good headline.

What kind of recovery doesn't require raw materials?

Are equities so far detached from the real world that they can (continue) to rise unabated without affecting demand for any of the tangible assets used to create things?

Sounds like the service oriented economy has been a roaring success. Primary production is no longer relevant to growth. Amazing.

Isn't proof of what you're questioning, in the fact that the value/cost of the raw commodity in proportion of the retail product, seems to get smaller in every passing year.

[Rareearth]

For those that are concerned with the velocity of money, then inflation is stimulus to increase the velocities.