Which will be more transitory- Brandon or inflation? BTW, Germany's inflation figure came in yesterday at 33%. How long is a nations memory?
Inflation is a funny thing, and the central banks lose more credibility by the day. Take a look at the two biggest purchases that people make: houses and cars. Since the early 1990s, car prices did not increase much but have increased considerably in the last 2 years. Still, prices have not doubled. Regarding the housing market in that time, prices have increased 6x, or from 3x annual income to 9x. It is nuts that it is not included in official inflation stats, as it is the highest fixed expense (mortgages or rents) that the low to middle class have.
Bottom line is. Without central bank monetary policy allowing the commercial banks to print like crazy. Add to that governments ( backed by central bank printing) spending huge deficits (often at the same time). Inflation can’t get away like this. If here was only 3% more money in the system as there was in 2019. House prices, stock prices, car, caravan and boat prices along with everyday consumer goods couldn’t start jumping like they have. sure they could short term but few could buy them. Then it truely would be transitionary. An ebb and flow according to productivity and innovation.
It saves rhe government lots of money by not using the real inflation number. Every year they give a raise to social security, welfare, military and everything else. A smaller CPI probably saves them tons.
Hope this link will work. https://www.lynalden.com/june-2022-newsletter/ In the newsletter, two of her charts points to a very similar time in history that we could be facing now. Worth subscribing to her Newsletter if you are into her work.
She's always worthwhile reading. The "government printing money = inflation" thesis is an oversimplification (I argue fallacious) of the cause of price inflation. Rather the inflation we're experiencing is a result of the near complete breakdown of our complex market environment. One of Alden's earlier newsletters included data back to the 1940s showing that government spending/bank lending, commodity prices and inflation are not 100% correlated but when the government spending/bank lending meets failing supply chains and a collapse in productive activity, then shit starts to get more expensive. https://www.lynalden.com/price-signals/ Influenza is reeking supply chain havoc throughout Qld. Companies are facing significant delays to the supply of goods and services. It's just one assault after another on the functionality of the market.
I don't think she disagrees with what your saying. However, I see the main problem as being cause and affect. When the Fed plays the expansionary card, the biggest problem that I see, is malinvestment. In my opinion, that is the cause. The flow of funds is not distributed in proportion to where they are most needed within the economy. That comes down to the Policy Makers - Regulators and Key stakeholders. We can see it unravelling Globally. The affect will be bottlenecks tying up supply. Tariffs, Embargos, Trade Agreements locking out certain countries and lack of trust between Nations which impose restraints is a recipe for disaster. We have spineless leaders that will follow the mantra that they are given, or face destruction. I have no doubt that we are heading to War.
Sorry, should have been producer prices. https://www.marketwatch.com/story/g...osted-highest-increase-on-record-271653032416
UK inflation hits 9.1% as food prices jump The UK’s inflation rate hit another 40-year high in May, reaching 9.1 per cent, its highest level since 1982. Fuelled by higher food prices, the rise was in line with economists’ expectations that suggest inflation will hit double digits by the autumn. https://www.ft.com/content/663ac703-b923-40d1-8b4b-39fac00c8142
San Francisco Federal Reserve Bank President Mary Daly on Friday said another 75 basis point interest rate hike in July is her "starting point," though if the economy slows more than she expects, a half-point hike could be reasonable. https://www.reuters.com/markets/us/...uly-2022-06-25/?taid=62b67ee083e94e00014bef62
That's also a lot lower than the current rate of inflation, and a lot of risk to have your capital held up for 24 months in this environment.
There's little to no risk in being in cash, everything is lower than the current rate of inflation, but I take your point about the 24 months. Just on that it lacks appeal.
The banks must have a view that the interest rates are going higher (within 6-12 months) and trying to lock in some "Cheap" short to medium term funding now to use to fund their lending book in 6-12 months time....just getting ahead of the curve and hoping the average mug punter will lock in for that rate / term accordingly.
I have been offered a 1.3% per annum loan up to $50k from one of the banks that I am with. It is unsecured and no questions asked about what the money is for, with a cheque sent in the mail within a few days. Maybe I should reinvest the money in a term deposit and make some profit from the bankster bastards. On second thoughts that sound too boring, I think I will use the funds to buy some more shiny yellow metal relics for the stack instead.
