What so many people misunderstand about things is really tiring.
When money flows into assets and bonds instead of to chase after goods and services, it all gets locked up in what economist refer to as liquidity traps. So you do see Asset price inflation, but you don't really see prices rising all that much in the real economy. A lot of people forgot this part, but when the housing bubble exploded initially housing prices started trending downwards, until the fed got involved and started bailing many of the banks out.
The thing that really grinds me about all this inflation rhetoric is I survived from 2007 to 2016, and I can tell you I was watching things unfurl and all I could think is the Fed has increased the money supply by 313% and yet can't even seem to meet its goal of 2% inflation.
It took a Virus, We went through 3 rounds of quantitive easing and while they restored faith in the stock market the real economy only started to inflate after supply chains seized up and shut down due to fear of the virus.
Now we've got Avian flu and a Fertilizer shortage contributing to High grocery prices.
What I'm getting at is the market isn't wrong that there's a lot of money out there but so much of it isn't being spent chasing after Goods and services and increases in the money supply alone don't make price levels rise, The velocity of money has to rise at the same time.
But we spent over ten years in a situation where the M2 money supply tripled and yet the fed struggled to meet even 2 percent
Even now, the high inflation is anemic compared to the M2 money supply increases.
So I can see a situation opening up where the rich don't spend more on supply of goods and services.
The poor stop paying their debts.
The banks seize up credit and stop issuing as many loans,
Cash becomes scarce because Credit is much harder to obtain
and everyone who is rich is spending all of their disposable income chasing yields on the market
Not to mention suddenly due to AI companies stop hiring entry level coders a Single engineer does the work of 5 so eventually inventory levels start to increase massively just as Credit tightens due to borrowers not paying their debts.
and a credit crunch unfurls.
Debt levels are sky-high currently, much of it won't be repaid, and if enough of it isn't prices will have no choice but to come down.
all of which might sound good news or like relief but it's not because in a Deflationary Spiral it becomes VERY hard to make a profit.
people start losing their jobs and everything starts to feed on itself in feedback loops that keep decreasing demand and thus prices go down further more people lose their job and demand falls further
it's a vicious cycle once it gets going and it's brutally hard to inflate your way out of.
3 rounds of QE and it STILL took a virus to make Inflaiton return.
The thing that really grinds me about all this inflation rhetoric is I survived from 2007 to 2016, and I can tell you I was watching things unfurl and all I could think is the Fed has increased the money supply by 313% and yet can't even seem to meet its goal of 2% inflation.
It took a Virus, We went through 3 rounds of quantitive easing and while they restored faith in the stock market the real economy only started to inflate after supply chains seized up and shut down due to fear of the virus.
Now we've got Avian flu and a Fertilizer shortage contributing to High grocery prices.
What I'm getting at is the market isn't wrong that there's a lot of money out there but so much of it isn't being spent chasing after Goods and services and increases in the money supply alone don't make price levels rise, The velocity of money has to rise at the same time.
But we spent over ten years in a situation where the M2 money supply tripled and yet the fed struggled to meet even 2 percent
Even now, the high inflation is anemic compared to the M2 money supply increases.
So I can see a situation opening up where the rich don't spend more on supply of goods and services.
The poor stop paying their debts.
The banks seize up credit and stop issuing as many loans,
Cash becomes scarce because Credit is much harder to obtain
and everyone who is rich is spending all of their disposable income chasing yields on the market
Not to mention suddenly due to AI companies stop hiring entry level coders a Single engineer does the work of 5 so eventually inventory levels start to increase massively just as Credit tightens due to borrowers not paying their debts.
and a credit crunch unfurls.
Debt levels are sky-high currently, much of it won't be repaid, and if enough of it isn't prices will have no choice but to come down.
all of which might sound good news or like relief but it's not because in a Deflationary Spiral it becomes VERY hard to make a profit.
people start losing their jobs and everything starts to feed on itself in feedback loops that keep decreasing demand and thus prices go down further more people lose their job and demand falls further
it's a vicious cycle once it gets going and it's brutally hard to inflate your way out of.
3 rounds of QE and it STILL took a virus to make Inflaiton return.
