The Death of Inflation

[Austrian Economics]

A falling interest rate trend in fiat currency is primarily deflationary. Retail prices can rise due to non-monetary factors like supply disruptions and regulatory compliance measures. So price rises are not all due to what is usually called "printing" money.

The gold price is falling simply because it has an inverse relationship to interest rates. Because debt levels have exploded over the past year (and for many years prior to that) no one should be surprised that there is tension in the capital markets as borrowers try to find buyers for their debt. It looks like the central banks are resisting the urge to buy that debt, but it won't last.

If central banks did not intervene, interest rates would climb like a homesick angel. Governments are petrified of that because then the days of easy deficit financing would be over in an instant, so they will pressure central banks to get into the bond market.

If you want to see inflation, just look at asset prices, which rise in an inverse manner to interest rates. My friend in Vancouver knows someone who just bought a dump there to tear down and put up a duplex for $1.3 million. Two weeks after the purchase, the contractor offered $1.8 million.

Being able to buy a cheap TV is not necessarily a sign of economic progress. Being able to purchase a house at reasonable cost and save for retirement are what denotes progress. The latter are under threat right now.

[Austrian Economics]

Falling interest rates are deflationary? I don't think the Austrian School of thought and Von Mises would agree with you.

They don't for the most part. Von Mises subscribed to the quantity theory of money and I have to disagree with him on the rising quantity of money=inflation theory.

I follow the theory of lesser known Austrian economists like Carl Menger (who actually started the Austrian School) and, in particular, Antal Fekete. Fekete held that the main driver of commodity price inflation is interest rates. The 70s were a period of rising interest rates, hence rising commodity prices. We are now in the falling cycle, so commodity prices will trend downward.

Fekete grew up in Hungary but taught at Memorial University here in Canada for many years.

Although deceased, Fekete's writings are still up on his website: https://professorfekete.com/

[biglentil]

[biglentil]

[HITTGrapevine]

Hard to know which way things will go next. Lots of opinions and theories. All interesting but not sure I'd put too much faith in any of them.
But I certainly agree that CPI is no longer a relevant indicator of inflationary pressure. Outdated methodology and irrelevant to many Canadians.
Regarding the fed, we can probably all agree that central bank will continue to look for ways to manipulate the economy and avoid a big crash at all costs. Trillion dollar question is: Are they up to the task?
When other monetary policies fall short of delivering intended outcomes, its probably reasonable to expect more direct stock market manipulation and other forms of QE, central bank intervention in commercial credit markets.
Used in tandem, the fed might be able to nurse along the sick economy for a long time yet.
But the time bomb seems to be ticking.
Somewhere down the line, you'd have to think there will be a day of reckoning.
Then again, my track record for predicting economic outcomes is 50/50 at best.
https://www.forbes.com/sites/investor/2020/06/23/will-the-market-crash-now-that-the-fed-stopped-pumping-the-stock-market/?sh=51e1408055f4

[jazz]

If you think there is no inflation, look at the price of houses or cars. You cannot get a sub $30k vehicle anymore in any trim level. Anything close to that range would be a subcompact.

We have to stop looking to the CPI numbers. They are a mirage. The real inflation is in assets and services not consumer goods...yet. But that could change now that we have wider inflation taking hold and new ESG and wealth taxation coming our way.

The average joe has no idea whats coming their way. Many will be crying to be put on the govt dole permanently and just shelter in place forever.

To keep china exporting the rest of the world needs to see a commensurate increase in COL so we never ever try to think that we can make anything here, except fiat debt.

[canolacrazy]

i think most on here would agree that central banks have been kicking the can of raising interest rates to manage monetary policy down the road has been happening for years. an earlier poster said trying to guess timing and make money off it is the problem. i agree with that. look at the toronto and vancouver housing markets. we've been told that they have been overheated for years, and yet if you live there and haven't jumped on the bandwagon, you look like an idiot. same with farmland. how many of us have said "i'll never pay the price, i can't make any money at it." one thing i do believe. the longer central banks don't have the guts to tighten monetary policy and stop protecting stock investors, house speculation etc, the quicker and more painful the crash will be.

[Guest]

If you think there is no inflation, look at the price of houses or cars. You cannot get a sub $30k vehicle anymore in any trim level. Anything close to that range would be a subcompact.

We have to stop looking to the CPI numbers. They are a mirage. The real inflation is in assets and services not consumer goods...yet. But that could change now that we have wider inflation taking hold and new ESG and wealth taxation coming our way.

The average joe has no idea whats coming their way. Many will be crying to be put on the govt dole permanently and just shelter in place forever.

To keep china exporting the rest of the world needs to see a commensurate increase in COL so we never ever try to think that we can make anything here, except fiat debt.

shit, look at everything
just about all is 50-100% higher than a year and ahalf ago

[errolanderson]

Are economies heading into an inflationary depression?

The Fed is hanging onto markets by the skin-of-their-teeth right now. If Powell says the word ‘inflation’, stock markets immediately tank. If Powell continues with current abusive money printing, markets will tank with failed money velocity (IMO).

And if markets tank, the price of tractor tires and land prices triggering upside down mortgages won’t follow?

Pick your poison . . . .

[errolanderson]

The U.S. Senate approved another $1.9 trillion in money printing on Saturday for unemployment benefits and and another round of free cheques and helicopter money.

Stock markets not performing well given the mass gravy train was greased again this weekend.

Economics and central bank policy at-its-absolute worst (IMO). This will not end well . . . .