Decent twitter thread from one of the most prominent dollar bulls Brent Johnson here
Basically, as long as the Fed's liabilities (Bank's reserves that remain parked at the Fed) created via QE do not get spent into the real economy via bank lending, inflation will be muted.
Interesting video here from uneducated economist:
-Fed claims that they will allow inflation over 2% from now on, supposedly a major policy shift
-However, Fed hasn't been able to achieve that over the last decade even though it was their goal, so why should we believe them now?
-At the same time, Fed uses manipulated CPI statistics that drastically understate inflation so that normies keep thinking that there isn't inflation
-The financial media is pumping that the 2% inflation is likely this time (perhaps to keep the masses invested in equities?)
-But yet the rich are hoarding cash and preparing for a crash...?
My comment: the media may be trumpeting 2% inflation, but not major inflation, and definitely not calling for a crash either (from stocks being way overvalued). Because when inflation gets serious, then equities are no longer a hedge, and hard assets like metals, land, bitcoin, and maybe survival gear/food are the best bet (and other things mentioned earlier in this thread). And you can be sure that the financial media absolutely does not want people panic buying into hard assets outside of the financial system.
Very confusing - even the smartest macro guys out there can't agree on whether we are in a bear rally within a deflationary debt bust, or if the Fed has (or is about to) crossed the Rubicon into directly spending money into the economy by monetizing deficits, likely leading to stagflation and eventual end of the USD.
@SantiagoAuFund
Hi everyone. Based on recent comments/twitter posts/interviews...my email, vm, dm & twitter stream have been inundated with questions about, & challenges to, my assertions regarding QE being "deflationary" rather than "inflationary"
Many extremely smart & successful people (many of whom I like & respect) disagree with me. Vehemently. As such, I have been asked for "Proof" or my "Source" to back up my assertions. The "Smoking Gun" per se... I'll attempt to answer this as clearly as possible below
Some clarification: The assertions aren't to say QE is "never" inflationary. Or "can't" be inflationary. The assertion is that it's "not currently" inflationary. It needs cooperation from commercial banks in form of credit extension (which isn't currently happening).
And...since banks are currently NOT lending... there is no money multiplier effect... and thus the inflationary pressures that would normally come if they WERE lending... are NOT currently present.
As far as "source/proof" goes: My answer is the Federal Reserve Act itself. On broad basis Congress gave Fed power to regulate the economy by setting monetary policy. To accomplish its goals it gave the Fed power to LEND but not to SPEND. Powell recently reiterated this.
As such, with exception of physical currency (notes) & coins, Fed liabilities are NOT legal tender. Because Fed liabilities being legal tender would effectively grant them the power to spend. Which as Powell himself says would be in violation of the Federal Reserve Act.
Basically, as long as the Fed's liabilities (Bank's reserves that remain parked at the Fed) created via QE do not get spent into the real economy via bank lending, inflation will be muted.
Interesting video here from uneducated economist:
-Fed claims that they will allow inflation over 2% from now on, supposedly a major policy shift
-However, Fed hasn't been able to achieve that over the last decade even though it was their goal, so why should we believe them now?
-At the same time, Fed uses manipulated CPI statistics that drastically understate inflation so that normies keep thinking that there isn't inflation
-The financial media is pumping that the 2% inflation is likely this time (perhaps to keep the masses invested in equities?)
-But yet the rich are hoarding cash and preparing for a crash...?
My comment: the media may be trumpeting 2% inflation, but not major inflation, and definitely not calling for a crash either (from stocks being way overvalued). Because when inflation gets serious, then equities are no longer a hedge, and hard assets like metals, land, bitcoin, and maybe survival gear/food are the best bet (and other things mentioned earlier in this thread). And you can be sure that the financial media absolutely does not want people panic buying into hard assets outside of the financial system.
Very confusing - even the smartest macro guys out there can't agree on whether we are in a bear rally within a deflationary debt bust, or if the Fed has (or is about to) crossed the Rubicon into directly spending money into the economy by monetizing deficits, likely leading to stagflation and eventual end of the USD.