INFLATION IS QUIETLY & RELENTLESSLY COMING IN DIFFERING WAVES
If the Treasury borrows $2,163 during the second half, that would amount to an average of $360 billion per month. The Fed, however, has led the market to believe that it will create “only” $120 billion per month, which would amount to $720 billion during the second half.
Due to Monetary & Fiscal Policy intended to offset lack of economic growth and forestall the impacts of business cycle impacts on an over-leveraged and over indebted financial system, the Central banks have been trapped into ever increasing inflationary waves.These waves are bringing inflation to an ever broadening global economic constituency.
- Price Inflation,
- Services Inflation,
- Asset Inflation,
The We should expect that by YE 2020 to see the Velocity of Money to normalize back to rates slightly higher than we are currently experiences due in large part to massive stimulus “floating” out in the global economy.
- This projection is primarily based on expectations of a normalization of the Velocity of Money.
- Velocity in the US is probably at around 0.8 right now. The lowest recorded number before that was 1.4 in December 2019, which was at the end of a multi-year downward trend.
- Quantitative easing was an important factor in that shrinking velocity, because central banks handed money to savings institutions in return for their Treasury securities. And all the savings institutions could do was buy financial assets.
- They couldn’t buy goods and services, so that money couldn’t really affect nominal GDP.
- For the last three decades, China was a major source of deflation.
- We are at the beginning of a new Cold War with China, which will mean higher prices for many things.
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