Well electronics because there is a world wide chip shortage which is affecting virtually every form of finished technology good. Travel because of excess demand from opening of economies from COVID.
Basically you have a sudden pent up demand that is not being met yet by the production curves of major world economies.
“transitory”
FED believes that this temporary and in due time suppliers will move production curves to match a stabilizing demand curve.
I do not believe inflation is truly happening
why?
Simple look at 30 YR and 10YR US treasury bonds. If the bond market truly saw high inflation on the horizon you would see these bonds going up to compensate because investors want the risk free rate of return + inflation premium. Instead in recent weeks you saw drops in the treasuries.
This tells me bond market
1) sees mundane growth on the horizon
2) sees muted inflation in the long term
Look at Japan it printed the living **** out of the yen and it couldn’t create true lasting inflation and experienced deflation at various times in last couple decades.
If you had TRUE inflation then there would be a demand for money, demand for money is non existent because companies are struggling to find ROI projects worth investing in. When demand and velocity of money is down, it’s hard to have inflation...stagflation maybe.
Also look at mortgage rates 2-3%
historically low when there is true inflation in the economy banks wanted to be compensated on the potential for future payments to be worth less than present day. Yet we have seen low mortgage rates since the 2008 financial crisis.
So what does it all mean?
It means major problem with capitalistic engine and global economy because inflation is actually healthy and needed. Yet Since 2008 despite all the money printing inflation has been muted.
this is telling me demand for money is way down, velocity of money is way down, true capital intensive investments are way down, and inflation is “leaking” out of the US economy and being absorbed by emerging market countries in order to make their currencies more competitive for export of their products.
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inflation? Bro don’t make me laugh. Fed wants you to desperate believe it’s pathetic attempt at inflation generation is working.
There hasn’t been major inflation since Reagan and Volker killed hyperinflation in the 80s
20% fed funds rate to 12% to 6% to 4-5% to 0%
Temporary inflation from a pandemic, supply bottlenecks, and recovering work face = / = true structural inflation that a healthy economy needs.
conclusion: barring another industrial Revolution (AI/Quantum computer/Space) that generates ACTUAL growth (not this net or negative growth fueled by debt BS) the global economy is in trouble in the long run.
Capitalism merely beat Communism. It was the better of the two models. Not the true model of the universe.
But modern capitalism biggest flaw was it relied on its own population to fuel most of the growth (GDP consumption) and it relied on the corporate governance model to make sound long lasting capital rich investments to fuel future growth.
well guess what happened?
corporate governance said f that I’ll just give it out as dividends to my shareholders and cut costs (thus improving financials) by cutting wage growth across the board and replacing it with automation whenever I can.
US government said ok and I’ll help that by ensuring this mass swarm movement of financial philosophy being enacted across the entire economy goes unimpeded. I’ll turn a blind eye to rising tuition costs (student loan debt), rising entitlement programs (Medicare, SS, etc), unnecessary wars, etc. I’ll make up the shortfall in growth by issuing more debt fueled growth knowing full well its a diminishing return feedback loop.
Then the US decided in last 2 decades to divide the country slowly but surely under this dumb “liberal vs conservative” “Democrat vs Republican” mantra to control the sheep (in this case evolved monkeys) in order to have its citizens/domestic population blame each other for the country’s problems and not the system itself. Thus allowing the system to escape any resemblance of accountability.
But wait the carnival show gets even better! Then an unintended consequence of this policy was that US’s own elected evolved monkeys (presidents, judges, congress) started drinking the kool aid too (number one rule about drug dealing...don’t use your own product bro) and now they too are actually believing this manipualition tactic as being true.
Deep state is [insert face_palm emoji] I would imagine.
But that’s a story for another day...
So now the two critical most parts of the capitalistic system.....(1) corporate governance/free market theory/private enterprise.... (2) domestic population consumption are not working properly.
In a nutshell they took the most important cog in the engine (the worker/civilian/domestic citizen) who is responsible for 70% of growth in the country and ****ed him so well over that he can’t consume like he needs to. Caused a permanent physiological change in how he consumes.
This in turn feeds the negative feedback loop to the corporate governance model of believing their subdue global growth in the horizon, thus don’t waste money on capital intensive projects with long and uncertain timelines. Thus creating a self fulfilling prophecy when growth doesn’t show up you say see I was right....and the cycle starts all over again.
So instead companies have engaged in financial engineering to create boosts in stock prices which in turn creates value in executives own stock options (which most executives compensation comes from). You can see how something with initially good intentions ends up creating unintended consequences.
Good in theory...however applied across the entire domestic economy means a massive game of musical chairs in who ends up with the short end of the stick....usually the government and the domestic citizen.
So no....inflation isn’t the problem. This massive negative feedback loop that was generated is the problem. And every country in the world (including Iran) is at risk. There is no easy solution. You are asking the entire system that has taken years of economic evolution (devolution?) to realign again.
Might as well ask a combustible engine to become a warp drive while you are at it.
