Prices, Inflation/Deflation, Interest Rates & The Fed

cosine

Woodpecker
Happy to. The Federal Reserve claims to print money. They claim this and the news repeats it so people will think there's going to be hyperinflation and will spend more money rather than save it (and so hopefully keeping deflation from happening, which is partially what happened in 2020).

However, none of this is true. Instead, they extend bank reserves to banks. These are not money nor considered like money. In fact this isn't how money is made at all. Everything I've said here is easily verifiable and out in the open too. It's not a secret and no conspiracies needed. They're not printing, period.

The difficulty I have with the claim that they are not printing:

Whether it's QE or the 0.25% interest rates, the Fed still manages to dramatically increase the money supply, which in turn appears to inflate asset prices. Someone found a 0.9 correlation with the money supply and the price of the S&P.

The 2020 covid recession was, by some measures, the most severe recession in all of recorded history. Yet the S&P is still significantly higher than it was before the lockdowns.

I don't see how I can reconcile "they're not printing, period" with the stock market still going up. You're saying ALL of this increase is due to:

people will think there's going to be hyperinflation and will spend more money rather than save it

Yet that flies in the face of money supply correlations with the S&P:

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EndlessGravity

 
Banned
Protestant
The difficulty I have with the claim that they are not printing:

Whether it's QE or the 0.25% interest rates, the Fed still manages to dramatically increase the money supply, which in turn appears to inflate asset prices. Someone found a 0.9 correlation with the money supply and the price of the S&P.

The 2020 covid recession was, by some measures, the most severe recession in all of recorded history. Yet the S&P is still significantly higher than it was before the lockdowns.

I don't see how I can reconcile "they're not printing, period" with the stock market still going up. You're saying ALL of this increase is due to:



Yet that flies in the face of money supply correlations with the S&P:

View attachment 44972



As I've said, M2 only measures domestic currency and we're the world's money. M2 is a nearly meaningless measure. Additionally if you look closely you're incorrect and they don't correlate or else those drawdowns in 2008 and 2020 wouldn't be possible if these were directly related as one being the mechanism for the other, as is often claimed (it's actually more complicated why they appear to match and is actually part of the scam).
 

cosine

Woodpecker
As I've said, M2 only measures domestic currency and we're the world's money. M2 is a nearly meaningless measure. Additionally if you look closely you're incorrect and they don't correlate or else those drawdowns in 2008 and 2020 wouldn't be possible if these were directly related as one being the mechanism for the other, as is often claimed (it's actually more complicated why they appear to match and is actually part of the scam).
That's a good point about the 2008 and 2020 crashes, but on the other hand the 2010's or nearly any expansionary period seem pretty in-line with the idea that the Fed controls the market.

In 2018 the Fed started slowly raising rates, and the market wiped out all of its gains that year.
In 2019 the Fed reversed course and the S&P rose 29%.

The entire real estate industry is also clearly massively impacted by the Federal Funds Rate. Rates drop, number goes up. Rates rise, number goes down.
 

EndlessGravity

 
Banned
Protestant
That's a good point about the 2008 and 2020 crashes, but on the other hand the 2010's or nearly any expansionary period seem pretty in-line with the idea that the Fed controls the market.

In 2018 the Fed started slowly raising rates, and the market wiped out all of its gains that year.
In 2019 the Fed reversed course and the S&P rose 29%.

The entire real estate industry is also clearly massively impacted by the Federal Funds Rate. Rates drop, number goes up. Rates rise, number goes down.

Although this appears to be the case, if you go back and look the Fed's action on rates are always after the market has already moved to that rate, ie they're lying about their control and it's very obvious and undeniable. Even today, you can verify this over the past 2 years, if you like.
 

Cynllo

Kingfisher
Other Christian
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NoMoreTO

Hummingbird
Catholic
Deflation? Gas prices, food, commodities and rent are all up in USA. Even the gas lighting stat known as the CPI is saying 9.1% and rising. Assets are down but only in the short term as people secure themselves fiat to pay for expenses. Once Jpow admits he can't hike rates anymore and has to start cutting for The Greater Good assets will moon.

Inflation will always come with deflation. It depends on whether a good is consumer discretionary. Gas, Food, Housing,... these are inelastic goods which people must buy at the higher price. Other items like dinner out, vacations, are discretionary. So prices can rise on essentials, while still dropping for consumer discretionary, slowing the whole economy down.

The Powell Pivot is a big question mark, I was a believer for a long time. Lately, I am feeling less certain. Good old fashioned jews squeezing people with high interest rates is the classic move. The great reset is a possibility, but so is continued tightening and pain. Ultimately Powell and the Fed will just decide. And how do we know that they will make the right move? It is a controlled demolition after all.

Keep working, be cheap, be ready for both scenarios is my mindset.
 

NoMoreTO

Hummingbird
Catholic
The difficulty I have with the claim that they are not printing:

Whether it's QE or the 0.25% interest rates, the Fed still manages to dramatically increase the money supply, which in turn appears to inflate asset prices. Someone found a 0.9 correlation with the money supply and the price of the S&P.

The 2020 covid recession was, by some measures, the most severe recession in all of recorded history. Yet the S&P is still significantly higher than it was before the lockdowns.

I don't see how I can reconcile "they're not printing, period" with the stock market still going up. You're saying ALL of this increase is due to:



Yet that flies in the face of money supply correlations with the S&P:

View attachment 44972



Yes. But it still could retrace back down to pre covid highs quite easily from here. Even with all the extra money sloshing around.

I think the problem is, it's hard to know exactly how much extra money sloshing around will function in a serious downturn.

S & P is above that M2 Money supply line, for most of the chart it lives well below.
 

budoslavic

Eagle
Orthodox
Gold Member
I hear a lot about labor shortages everywhere.

Did people stop working? Did they change profession?
In my opinion, no and no.

The "mandatory COVID vaccination" policy is the reason for labor shortages - i.e., employees refused to get vaccinated so they quit, resigned or retired.

Edit. Also, I noticed a lot of the job ads contain COVID policy section (i.e., vaccination status, must be vaccinated, must wear face mask, etc.). People won't apply for the job if a business requires COVID vaccination status. Most of them are in Democrat-run states like New York, New Jersey, California, etc.
 
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COtrailrider

Robin
Gnostic or New Age
A lot of people took a hiatus due to asset inflation, including crypto - I know some of them. Many thought nominal value increases were 'real' increases but now their purchasing power is way down and they'll soon be scrambling, but the writing on the wall is clear that hiring freezes and layoffs are here to stay for some time.

I also know a bunch of the 55+ crowd did quit because of the vaxx mandates - I'm not in that crowd but quit a lucrative job for the same reason.

Some also went into the gig economy/freelancing which is changing the dynamics of 'work' too.
 

Blade Runner

Hummingbird
Orthodox
Deflation? Gas prices, food, commodities and rent are all up in USA. Even the gas lighting stat known as the CPI is saying 9.1% and rising. Assets are down but only in the short term as people secure themselves fiat to pay for expenses. Once Jpow admits he can't hike rates anymore and has to start cutting for The Greater Good assets will moon.
We dunked on that a long time ago. Will disinflation happen when the (lack of) liquidity from raising rates causes problems? Of course. But that slowdown will also cause lower supply, which will outdo the lowered demand relatively, and inflation will still be king.

Talking about the technicals of QE and the conflation of terms like "printing" doesn't matter when the Fed still backstops Federal spending. Yes, fewer loans will go out and the money supply will not increase as before in the "eased" economy, but I've been grave dancing for a while and the numbers continue to prove me right. How many months in a row is it now?
 

EndlessGravity

 
Banned
Protestant
Although QT and Fed jawboning about rates is not the real cause of the 2022 sell-off across markets, watch for stabilization if and when they reverse course and return to QE. I would expect no later than September.

This may be a tiny window to offload any assets anyone might be underwater on. However, this is not individual financial advice and you should do your own research.
 
A lot of people took a hiatus due to asset inflation, including crypto - I know some of them. Many thought nominal value increases were 'real' increases but now their purchasing power is way down and they'll soon be scrambling, but the writing on the wall is clear that hiring freezes and layoffs are here to stay for some time.

I also know a bunch of the 55+ crowd did quit because of the vaxx mandates - I'm not in that crowd but quit a lucrative job for the same reason.

Some also went into the gig economy/freelancing which is changing the dynamics of 'work' too.
Don't forget that a lot of boomers are retiring or cannot work any longer due to age. That is a massive demographic that is reaching (hopefully happy) obsolescence. Not enough replacements, especially skilled replacements
 

Blade Runner

Hummingbird
Orthodox
Although QT and Fed jawboning about rates is not the real cause of the 2022 sell-off across markets, watch for stabilization if and when they reverse course and return to QE. I would expect no later than September.

This may be a tiny window to offload any assets anyone might be underwater on. However, this is not individual financial advice and you should do your own research.
Your take is that when they finally pivot, make sure to take advantage of the short period bump, because bigger picture and longer term, the Fed is powerless in the face of a global recession. Correct? I'm with you there if that's your take. I'm also on the commodity and energy supercycle as my decade thesis. Right now I also have a good cash position, though.
 

EndlessGravity

 
Banned
Protestant

SeaEagle

Robin
Catholic
I hear a lot about labor shortages everywhere.

Did people stop working? Did they change profession?
I'm far from an economist, but 'labour shortage' is likely code for 'we need to import cheap labour'.
Hyperinflation is coming they said.


Reverse Bullwhip Arrives: Amazon Prime Day Blows Away Record Thanks To "79% Off" Discounts​


Obviously the NPCs haven't realized what's going on yet. Read that again: 80% discounts.

Hyperinflation is coming they said.


Reverse Bullwhip Arrives: Amazon Prime Day Blows Away Record Thanks To "79% Off" Discounts​


Obviously the NPCs haven't realized what's going on yet. Read that again: 80% discounts.
Discounts on crap though. Spyware and other cheap gizmos. Not sure if this is much of a signal personally.
 
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