Posted on 06/20/2021 10:34:42 AM PDT by blam
Earlier this month, Wealthion (a new YouTube channel featuring interviews with today's top experts in money & the markets) hosted its first online conference, at which economist Dr Lacy Hunt made a strong case in his keynote presentation that deflation -- not inflation -- will win the day going forward.
He predicts that much of the sudden sharp rise we are seeing in input prices will indeed be transitory. And he presented a parade of econometric data that show many historical precedents why this is likely to be the case.
Of course, the current debt, demographic and technological trends are very deflationary. To those who think that the flood of new $trillions in monetary and fiscal stimulus will trump these, Dr Hunt shows how much of that money just isn't making it out into the real world.
Instead, it's pooling up within the banks as massive excess reserves and the banks aren't lending enough of it out, as shown by the plunge in the Total Loan to Deposit ratio:
So while the money supply (M2) has skyrocketed over the past year, money velocity is lower than it has been in over a century:
This reveals an important limit of central bank policy. There is a point of diminishing return at which the Fed is truly "pushing on a string". It can shove as much new money into the banking system as it wants, but there's no guarantee that money will make it out into the economy.
And as some of that money invariably finds its way into asset prices, causing them to inflate, corporate executives have a mal-incentive to invest their capital into financial assets vs productivity. The end result is that overall economic productivity is depressed.
Dr Hunt concluded with a warning: deflation will win out unless the rules are changed. If the Fed's mandate is altered, as some are now advocating for, to become the "spender of last resort" and able to monetize its liabilities as legal tender, then that would change the game and runaway inflation would ensue.
Wealthion has just made the video of Dr Hunt's masters-level presentation available today to the general public.
I much prefer inflation but I agree in general with this assessment. I can prosper under either (within reason) but deflation is much less fun than inflation.
Interesting. I was mildly shocked when severe inflation didn’t ensue after all the rounds of QE following the 2008 recession.
Inflation is on its way up as surely as pouring water into a cup makes the level go up
. The Soviets used Hyperinflation to destroy the middle class. Seeing as how we are in another Communist Revolution that might be the whole.point ( plus all that semi real money to pass around)
Agreed. Velocity of money is picking up again sicne the economy started to re-opening. I think the inflation is just getting started.
You all know that it is the Christian’s fault, right? It’s Germany 1934-1944 all over again. The pogroms will be starting any time now. The gas chambers are likely already being planned.
We were stupid. History happened. We didn’t learn anything from it . . . it is set to repeat.
I have been posting for a long time that all hell is about to break loose. Saw this coming a long time ago, so took this moniker and began posting in 1998.
“Interesting. I was mildly shocked when severe inflation didn’t ensue after all the rounds of QE following the 2008 recession.”
The imminent inflationary collapse dream has been programmed into us for decades, I first heard it in 1965. Two generations have lived and passed on since then. I’m in the third and been retired for 12 years. Thanks God I didn’t fall for it.
“I have been posting for a long time that all hell is about to break loose. Saw this coming a long time ago, so took this moniker and began posting in 1998.”
So, you’ve saying you’ve been wrong for a long time.
No, not wrong. Patiently trying to persuade folks to change their behavior.
Never knew that phrase “Handwriting on the Wall” came from the bible..Thanks for the info...
“I have been posting for a long time that all hell is about to break loose.”
Nice try but your own words betray you. In finance everything happens at some point but it’s all about WHEN. People have been wrong about the Great Collapse for many decades so don’t feel bad, just keep studying and invest and act accordingly.
Do you remember 18% rates in 1980?
Deflation I can handle easier than high inflation.
“Do you remember 18% rates in 1980?”
Quite well, I was making money and outrunning inflation. That’s when I got my start. 1979-83 was great, 1984-86 was tough but I persevered and it’s been mainly clear sailing since then. Made out during the 1985-1990 real estate crash and doubled my net worth during the 2007-2012 crash.
And by the way, my future business partner had a $4mm net worth in 1980 at the age of 31. He went bankrupt by ‘84 and was down to $40k when we met. He was a millionaire again within 10 years.
I follow Lacy Hunt, and he’s absolutely correct - America’s massive debt, and extreme confluence of wealth in America’s financial and political elite are, by themselves, extremely deflationary.
BUT - when any future deflationary event occurs, what is going to be the Government/Federal Reserve response? They will go absolutely bonkers with money printing.
Daniel Chapter 5 verse 5
“BUT - when any future deflationary event occurs, what is going to be the Government/Federal Reserve response? They will go absolutely bonkers with money printing.”
Knowing what will happen and when is the KEY to making money. So what will you do when all this you have predicted happens to take advantage of it?
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