Re: It Always Bothers Me When Everyone Knows Something
When I was a kid my father was always looking for the next Great Depression that
was right around the corner. That was 50 years ago. No Depression.
There also has been a group looking for hyper inflation since the 1980's
when Ronald Reagan started the US deficit climbing into the trillions. That
was 40 years ago. No Hyper Inflation.
Depressions, hyper-inflation, expansions, recessions, and all manor of economic
oscillations do not naturally happen on their own. They are forced. But they
can only be forced by things directly connected through causation. Causation
is a narrow door. In this modern age, where daily time-series datasets have
replaced monthly and quarterly time-series datasets, causation has proved to
be much different to where theory had assumed 20 years ago.
Inflation, in reality, is very difficult to set up. You have to have a
situation where demand consistently outstrips supply to pressure inventories.
You also have to have a shortfall in new investment that manufacturing cannot
find risk capital on which to expand production to meet demand. You have to
have an international community which is unwilling to send trade into that
country to meet demand. And you have to have an international framework
in place to prevent international liquidity from flowing into investments
to meet that demand.
None of those four are in place. None of them is anywhere close.
Any US manufacturer that tries to raise pricing is going to loose market share
to foreign trade poaching. It is not going to happen.
In fact, the risks are on the deflationary side, and have been since the 1990's
when the trade deficit (and the US budget deficit which is linked to it) both
momentarily came into balance.
This is why interest rates have collapsed, why funds are driving up equities
to collapse rates of return for things like dividends and earnings, why the
US deficit spending is forced. Liquidity is leaving the US due to demand.
President Trump made a big deal of correcting the trade imbalance. He maybe
corrected 20 or 25 percent of it, but that is economic failure, and with a
mostly silent President Biden the trade pressure is coming back on.
The US dollar is still the worlds reserve currency, and probably will be as
long as the US remains the worlds only dominant superpower. The US dollar
is the new gold... all the worlds central banks want it to support their
In the meantime, the US Federal Reserve is buying US paper in trade for newly
minted liquidity, which pumps the markets to where investing in newly-forming
ventures makes more sense... adding to manufacturing and supply.