Inflation

[errolanderson]

errol, I think you are missing the next stage for the CBs, digital currency, defacto negative rates and cash dolled out directly to consumers to spend with a time limit on it.

They just tried that very experiment in china.

Jazz, good points . . . but these are just glorified 'can kicking tactics' to pass-the-buck and buy more time, while digging the financial hole deeper.

Right now, the market just wants you to buy more stocks, as this seen as an impenetrable money-making machine, The Dow just broke 35,000 points today, How about that . . . all is good. Investors can feel the warm, protective cocoon of central banks guarding their best interests.

So what's the end game? Valuations now have little connection to economic reality?

There are serious, unavoidable write-offs ahead no matter how debt is marketed in a new, shiny package. This will likely led by commodity weakness. Inflation won't handle this well. Zombie companies will begin to float-to-the-top as government stimulus gradually dries up. My two-bits . . . .

[AlbertaFarmer5]

The end game of a fiat currency is always a economic collapse followed by hyperinflation. It's never different this time.

But historically speaking it has always been one currency at a time.
What happens when they all do it together, possibly even coordinated?
Collapse is relative to something else, usually the competing currencies.
We seem to be seeing all currencies losing value relative to tangible assets now, but is that a recipe for hyperinflation and loss of confidence?

[agstar77]

Is it a zero sum game? Currency only a method of valuing barter. If they collapse we will find the true value of all goods. Maybe Chinese trinkets are not worth as much soy as they think.

[Austrian Economics]

A friend posted this on Twitter regarding the nature of inflation. Everyone focuses on rising prices, but the reality is that it's more like a process of borrowing every more until you exhaust your ability to pay it back. As more and more marginal borrowers default, the economy implodes.

"Inflation does not get us out of debt, or ease the burden of debt.

Inflation is the process of borrowing more. Each dollar of debt may be worth less--but we owe exponentially more of them!"

[errolanderson]

Does the continued drop in commodity prices and cryptos over the past 24 hours suggest a stronger U.S. dollar and weakening inflation? Crude oil has lost significant ground over the past two weeks. Many commodity bubbles have shown serious price cracks this summer.

The fact U.S. bond yields remain unable to move up despite strong U.S. inflation data suggests all is not well in demand recovery. Personally, I'm biased to a modestly higher U.S. dollar into August, weakening gold prices on failing inflation and continue pressure on the Cdn dollar. USD might take a run toward the 2021 high of 93.40 on the dollar index possibly by late summer. We'll see . . . .

Late July / Early August may be a test for equities and investor confidence meaning; right around the corner. South Korean bull analyst Dae won Yoon actually issued a technical warning for the NASDAQ last night. For what it is worth . . . .

[jazz]

errol, I think food and energy inflation are cooked in now. Just the crop problems and the ESG crowd in oil will assure that. That means a multi yr cycle before those shortages can be alleviated. The world is facing a 11mmbd production shortfall within a yr. and contrary to what chuck says, oil is in everything and will be for a long time. Thats inflationary.

How does a crop like canola get resupplied to surpluses now after 3 bad yrs. Going to take a while on that one.

And how do you tell someone who got a take out job for $12 an hr that they now have to take $11.

[errolanderson]

errol, I think food and energy inflation are cooked in now. Just the crop problems and the ESG crowd in oil will assure that. That means a multi yr cycle before those shortages can be alleviated. The world is facing a 11mmbd production shortfall within a yr. and contrary to what chuck says, oil is in everything and will be for a long time. Thats inflationary.

How does a crop like canola get resupplied to surpluses now after 3 bad yrs. Going to take a while on that one.

And how do you tell someone who got a take out job for $12 an hr that they now have to take $11.

jazz . . . an opinion, but Canada is going to lose global market share in the veg oil market this coming year. If canola production is just 16 million MT, something has to give as overall global veg oil supplies are on the rise. Do believe Australia and Ukraine will pick up some of the slack. Soyoil prices are high and break toward 50 cents/lb is quite possible in the new crop year. Palm oil has already shown cracks.

Canola will command a premium to a point, then demand destruction . . . .

As far as wages, as long as inflation in-tack, wages are steady / higher. But if the stock market blows a tire, this will be a game changer. Insolvent companies or Zombies may be forced to cut wages again (IMO). Real life economics, not gov't and central bank protected.

Inflation peaked in May (IMO) . . . fallout just beginning. I'm being opinionated, my apologies.

[Austrian Economics]

A falling interest rate environment is profoundly deflationary. There are going to be spikes along the way, but the overall trend for commodity prices is down.

We may have already turned the corner on the latest peak.

The only thing that will trigger another run-up is for interest rates to turn negative. This will happen eventually, perhaps sooner that we think.

[errolanderson]

The recent sustained plunge in U.S. bond yields is a surprise to inflationists. This suggests the market anticipates a cooldown in prices.

It pays to shop around as retail prices have already begun to drop in some categories. Apparently, the overheated used vehicle market is now in a price downswing. But Covid related price gouging is also still active.