Prices, Inflation/Deflation, Interest Rates & The Fed

Arado

Pelican
Gold Member
Couple more. Michael Burry put out a series of tweets warning about hyperinflation posted in this thread:


People say I didn't warn last time. I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.
...
The US government is inviting inflation with its MMT-tinged policies. Brisk Debt/GDP, M2 increases while retail sales, PMI stage V recovery. Trillions more stimulus & re-opening to boost demand as employee and supply chain costs skyrocket. #ParadigmShift https://t.co/kNT4memOVt pic.twitter.com/Bdw1CDn3Yf

He deleted his tweet history soon after.


Because of the centrality of the U.S. dollar in the trade and global debt system no one serious is predicting hyperinflation in the short term. Either way we're in unprecedented territory.
 

budoslavic

Owl
Gold Member
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Couple more. Michael Burry put out a series of tweets warning about hyperinflation posted in this thread:




He deleted his tweet history soon after.


Because of the centrality of the U.S. dollar in the trade and global debt system no one serious is predicting hyperinflation in the short term. Either way we're in unprecedented territory.

Over the decades I've been a rather dispassionate "investor." Even during the first GFC, I never got too worked up. While I might occasionally get irritated with a daytrade, it's mostly a game to me.

However, what were watching scares me. Maybe we get another ten years but the system looks so fragile and backward.
 

Blade Runner

Pelican
So which happens, scenario 1 or 2? Also, a responder told wonderboi that businesses don't always increase prices with increased demand, which is true ... for a while. So GDP may catch up.

I think there is too much tinkering and confusion for them to pull this off well. Something will give, and the market will get spooked. They can and have kept the game going (think of it, it's been a long time since 2009), and they can prolong it a bit, but anything beyond 15 months would shock me at this point. If we get to Fall without a 20%+ draw down, I will be 100% in cash of whatever my remaining paper assets are.
 

cosine

Sparrow
I think the key sentence here is 'investors don't want 2% bond yield if inflation is at 3%'. Besides, we should be so lucky! Real inflation at the current time is closer to 5% per anum, if not higher.
Really? 5%? Before 2008 I suppose, but not now.

Consider the 10-year price increases of:
- real estate in wealthy cities
- higher education
- healthcare
- price of the S&P 500

Look at a 25-year history of the money supply:
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2020 has been been more like 25% inflation.
 
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Source

Book (PDF downloadable)
"Dying of Money: Lessons of the Great German and American Inflations" by Jens O. Parsson

I was talking about inflation happening with a group of intelligent people this week. My communication skills kind of suck and I'm not some super genius (although I'm above average intelligence). I was telling them that I'm expecting inflation this year and they downplayed my concerns. One of them mentioned https://www.nakedcapitalism.com/. I checked out the site but frankly didn't get much value out of it. None of them were interested in crypto. Every group is an echo chamber, I think people here like to criticize the left but it applies here too.

I'm kind of worried to be honest. I've lived a very hard life and have a handful of commitments at the moment that I don't want to elaborate on. To be fair I think most people are having a hard time right now and I'm not an exception to the rule. I think 2021 and 2022 will be the "manmaker" years. To get some context read this:


I have some more bookmarks about these topics that I'll have to reread and analyze (such as that WSB image). At the moment I'm pretty stressed out but I did catch the word "revolution" on that WSB post. When there's supposedly food shortages coming in 2022 I think there will be some very angry people marching on the streets.
 
Couple more. Michael Burry put out a series of tweets warning about hyperinflation posted in this thread:




He deleted his tweet history soon after.


Because of the centrality of the U.S. dollar in the trade and global debt system no one serious is predicting hyperinflation in the short term. Either way we're in unprecedented territory.
Why did Mike delete his twitter history?


Here's some more concerned billionaires:

 

Arado

Pelican
Gold Member

Good overview here of the inflation thesis:


That puts Biden’s rescue and recovery package cost close to $4.9 trillion for the American taxpayers, compared to the $3.1 trillion that was passed in 2020. In our analysis, the Fed will need to substantially increase its planned quantitative easing. By our math, the level of QE this year that will be necessary to stop interest rates from rising appears to be closer to $300 billion per month than the planned $80 billion.
...
The new Treasury supply is naturally forcing rates higher. To keep rates down and prevent asset bubbles from bursting, the Fed must step in as the lender of last resort to purchase these Treasury securities. The problem is that this form of interest rate suppression, through money printing to finance large fiscal and trade deficits, is highly inflationary. In such an environment, investors will seek hard assets for protection.
...
Rising inflation expectations are a disaster for overvalued large cap growth stocks, including mega cap tech, as it shrinks the valuation multiples that investors are willing to pay for these securities. Given all the above factors, our analysis leads us to strongly conclude that we are in the early innings of what we are calling a “great rotation” out of long duration overvalued large cap growth and fixed income securities and into undervalued commodities and basic resource stocks.
...
Long-term inflation expectations in the University of Michigan survey just jumped above 3%, indicating even lower real rates than implied in the TIPS market.
...
Ultimately, the Fed will not be able to be the only buyers of last resort for Treasuries to allow the government to run extreme fiscal deficits. US taxpayers will be on the hook. As we have seen throughout history, an increase in income tax rates tends to follow a period of large government spending.
...
This time, on the other hand, the pandemic already started after several long years of under investments in the commodities market. To highlight, investments in mining exploration are at a 62-year low! We strongly believe that there will be major supply/demand imbalances in the next years as part of the current macro environment. This scenario is beyond bullish for tangible assets such as commodities.
...
More than Just a Silver Squeeze
The macro stage is set. The genie is out of the bottle. The list of macro, fundamental and technical reasons to be long precious metals today is extensive. It is more than just a “short squeeze” in silver. It is about:
  • Fiscal recklessness
  • A massive debt buildup
  • Monetary dilution to suppress interest rates
  • Lack of fundamentally cheap assets that yield more than inflation
  • A worsening current account deficit issue
  • Lack of new precious metals discoveries after long-years of underinvestment in the space
  • Reluctance of miners to spend capital on exploration and development, even as metal prices continue to rise
  • The supply cliff issue among producers as they deplete their reserves, shortening their average mine life, while not successfully replacing reserves with new deposits to expand their production
  • Gold and silver remain near record lows relative to money supply and the monetary base
  • The largest wealth transfer in history from the government to the people that creates major inflationary pressures
...
The flood of liquidity provided by central banks and governments has created speculative manias in virtually all asset classes of the financial markets, except commodities. But asset bubbles are unsustainable. Loose financial conditions, including a low 10-year yield and record tight credit spreads, have been an important driver for risky assets. The game is changing. The yield curve is steepening, long-term nominal rates are rising, and stocks, which are long duration assets, are now in danger.
 

Blade Runner

Pelican
That's a great analysis and I see the deflationary shift predicted by most to be very short lived, to the extent that it won't matter all that much - there won't be enough time for deflation to take place in any meaningful way, having been destroyed by clown world FED and government policies in short order. The funniest part of this is the desire to be in commodities that aren't bitcoin in any substantial percentage. I have been long commodities and gold already for 2 years, it's all I own, but I also own more than 50% of my total holdings in crypto. I hope I don't lose the keys, ha.
 

Arado

Pelican
Gold Member
As I've said elsewhere, to me a major financial crisis, in the equity markets at least, occurs within 15 months.
The big question still is whether the Fed is going to do enough printing and handouts before to many bankruptcies occur - with yield curve control and debt monetization I could see the equity markets chugging along, delivering nominally positive returns that fail to keep up with inflation while the purchasing power of the dollar is rapidly eroded. That's the short term politically easier path.
 

NoMoreTO

Ostrich
Uneducated Economist is trying to work out HOW raising interest rates, & fear of inflation are not causing gold to rise. It goes against the general rule of thumb. His main thrust - it's speculation on digital currency and negative interest rates.

He doesn't see Treasury general injecting 370 bllion USD/Month into the economy --- it's just too much. It would be financial suicide, the destruction of the system. He doesn't believe that's whats in store, but I wonder given "Great Reset" BS. He believes another plan is in the works. .

Also thumbs up to dollar cost averaging, putting a little in all the time as a basic investment method. Yes - he's in crypto.

 
Uneducated Economist is trying to work out HOW raising interest rates, & fear of inflation are not causing gold to rise. It goes against the general rule of thumb. His main thrust - it's speculation on digital currency and negative interest rates.

He doesn't see Treasury general injecting 370 bllion USD/Month into the economy --- it's just too much. It would be financial suicide, the destruction of the system. He doesn't believe that's whats in store, but I wonder given "Great Reset" BS. He believes another plan is in the works. .

Also thumbs up to dollar cost averaging, putting a little in all the time as a basic investment method. Yes - he's in crypto.

I've done my part in nudging friends and family into crypto. A white pill I got not too long ago was somebody bought some DogeCoin due to the WSB antics. And yes, DCA is the way to go. People don't need to take out a mortgage to own a piece of Bitcoin.
 
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