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Hyperinflation

The myth of hyperinflation series- #1 Fed's decisionEven as Fed balance sheet keeps climbing up and U.S takes on more national debt in the current low-interest rate environment, I am not eager to jump to the premature conclusion and entertain the idea of hyperinflation. I'm not saying that it is improbable, I am just saying that it is an unlikely and low-probability event. Yes, it is a fat tail risk that shouldn't be overlooked because it comes with the devastating consequence. However, several conditions and criteria need to be met before we can even realistically begin to talk about the probability of hyperinflation. Federal Open Market Committee's (FOMC) recent decision to keep the fed fund rate unchanged within the target range of 0-0.25% pretty much signaled FED's intention to hold rate effectively to zero until 2022, for at least two years. why? Based on the CPI of the past decade. Since great recession ended in mid-2009, inflation has stayed below 2% for all but two years, therefore; Fed is more worried about disinflationary risk than inflationary risk. Fed's initiative of "average inflation targeting" is determined to hit 2% inflation while keeping the employment low. Since Fed has been missing its inflation goal for a decade, people speculate that Fed may let the inflation run up to 3% or 4% to make up for it being below 2% for so long, thus triggering and opening the doorway to the potential hyperinflation. While such theoretical risk is not completely unfounded, the fact remains the same that we need to have the inflation first before we can have hyperinflation. Next, we will look at Fed's tools and to what extent Fed can influence the market.
TVC:DXYEducation
by Libratus
4
Wilshire 4500- You are not in the crystal ball businessWhat a crazy time we are in. 5 months ago, all was gloom and doom. Last month, almost every asset class was up except USD. SP500 has been above 3200 for one month and Nasdaq has been hitting ATH for 3 straight months. How do you explain this market irrationality? One possible reason is that pension, endowment funds and investors are forced to invest in equity market in the ultra low-interest environment. According to AAII (American association of individual investors) asset allocation's survey in July, 33.6% is invested in stock funds and 28.6% is invested in stocks. Only 3.4% is invested in bonds. According to Nomura, growth stocks have been outperforming value stocks for the last 15 years . Investor's penchant for fast growth and high valuation stocks lead to more velocity and volatility. According to Chris Irons of QTR research, holding period for stock has been steadily dropping over the past two decades. In the last two months, the stock holding period has gone down from 8 and half months to 5 and half months. In the current environment, market is flooded with high momentum stocks and the lure of chasing the rainbow is driving the increasingly common day trading mentality. Such volatile atmosphere typically leads to more FOMO behaviors. It makes even more sense if you factor in the wide availability of zero commission and fractional trading. Positive vaccine news may have also lifted the investor sentiment and contributed to the irrational exuberance. Has the market factored in all the bad news as it was mostly immune to the record-shattering bad GDP and resurgence of Covid-19 cases in July? Despite the poor GDP #, most other economic indicators actually improved including the ones I showed in the chart. Stock market momentum may stall, or it may even crash in the near future. However, at this point, I believe it will take extraordinary events such as hyperinflation, weakening of dollar (lose of reserve status), sovereign debt crisis, massive eviction or consumer debt default to go back to March low. With programs like PPE and massive QE to infinity in place, FED will ensure that interest rate remains low and continue to bail out zombie company in order to keep unemployment lvl artificially low. Thanks for reading through my analysis. Please follow me and click like. Much appreciated.
W
by Libratus
WHY IS GOLD GOING UP?PAUL KRUGMAN, AN INFAMOUS (((KEYNESIAN))), RECENTLY CLAIMED THAT THE PRICE OF GOLD WAS RISING DUE TO A FALL IN REAL YIELDS, NOT BECAUSE OF INFLATION! HIS BELIEF IS THAT INTEREST RATE YIELDS ON TREASURIES AND OTHER SAFE ASSETS BEING NEGATIVE ADJUSTED FOR INFLATION IS THE PRIMARY FACTOR OF DEMAND FOR GOLD, AN ASSET THAT HAS NO YIELD, ONLY CARRYING COSTS! HE DOES NOT BELIEVE THE DEMAND FOR GOLD IS FUELED BY A DESIRE TO SEEK PROTECTION FROM INFLATION! HIS POSITION CONTAINS MANY FLAWS, TOO MANY, IN FACT TO LIST IN ONE TRADING VIEW POST, BUT HERE ARE THE MOST FLAGRANT: 1) THE FALL IN REAL YIELDS IS DUE TO INFLATION OF THE MONEY SUPPLY, WHICH INEVITABLY LEADS TO PRICE INFLATION! A FALL IN INTEREST RATES IS CAUSED BY AN INCREASE IN AVAILABLE LENDABLE FUNDS, WHICH IS THE MOST DIRECT CONSEQUENCE OF FINANCIAL INFLATION! THIS IS INDICATED BY THE VELOCITY OF MONEY, AS THE VAST MAJORITY OF CURRENCY CREATED BY THE FINANCIAL SYSTEM AND THE CENTRAL BANK IMMEDIATELY FLOW INTO INTEREST-BEARING ASSETS, LOWERING THEIR YIELDS! 2) THE TRUE PRICE INFLATION RATE IS SEVERAL TIMES HIGHER THAN WHAT IS OFFICIALLY DECLARED, AND EXTRAPOLATING THIS FACT TO THE PAST HALF-CENTURY OF DATA, REAL YIELDS WERE INCREASINGLY NEGATIVE DURING THE 1980s AND 1990s, WHILE THE PRICE OF GOLD FELL, INVALIDATING HIS THEORY! 3) AS THE MONEY SUPPLY, RESPONSIBLE FOR PRICE INFLATION, HAS INCREASED FAR MORE THAN NOMINAL YIELDS HAVE DECREASED, THE FALL IN REAL YIELDS IS NECESSARILY MORE OF A CONSEQUENCE OF INFLATION THAN OF A LOW-GROWTH, LOW-YIELDING ENVIRONMENT! 4) A RISE IN ALL PRICES CAN ONLY BE DUE TO INFLATION, AND THEREFORE ANY PARTICULAR INCREASE IN PRICE IN AN ENVIRONMENT OF GENERAL PRICE INFLATION IS NECESSARILY A CONSEQUENCE OF INFLATION, REGARDLESS OF THE FACTORS FUELING ITS DEMAND! GOLD HAPPENS TO BE RISING FASTER THAN OTHER ASSETS/COMMODITIES AS IT HAS CONSISTENTLY PRESERVED ITS VALUE DURING PREVIOUS INFLATIONARY EPISODES WHILE REMAINING HIGHLY LIQUID! 5) IF A FALL IN REAL YIELDS WAS RESPONSIBLE FOR INCREASED DEMAND FOR GOLD, WOULDN'T DEMAND FOR CASH BALANCES AND PHYSICAL CASH BE EQUAL TO OR GREATER THAN GOLD, AS THERE IS WAY LESS CARRYING COST? YET THIS IS NOT THE CASE, EVIDENCED BY INCREASES IN VIRTUALLY ALL PRICES RELATIVE TO INCREASES IN M0/M1, A FALL IN THE DXY, AND, IRONICALLY, A RISE IN THE PRICE OF GOLD. 6) WHY IS THE PRICE OF SILVER AND METALS RISING AT A GREATER RATE THAN GOLD? THESE ASSETS ARE FAR LESS LIQUID AND ARE HISTORICALLY PERCEIVED AS VOLATILE PLAYS ON INFLATION! www.shadowstats.com www.zerohedge.com
COMEX:GC1!Long
by UnknownUnicorn4195243
Flipping my table over this madness.I know what I'm about to say is no surprise to anyone at this point. But the markets make absolutely no sense what so ever right now. What's going on? Why are the markets rocketing; Despite 40 million jobs lost, 10s of thousands of businesses closing their doors forever & riots breaking out in over 400 cities around the country... Simple. $2.8 TRILLION dollars added to the FED's balance sheet and fractional reserve minimums now merely being recommended practice, as opposed to legally enforced. What this really equates to is, as Jerome Powell best put it last month, "Unlimited money." A thesis the markets now reflect to be the intended path of the Federal Reserve. So go deep, as, in the premature words of Ray Dalio "Cash is trash!" But not in securities, while securities will make you great short term returns, as the FED continues to inflate their values to maintain confidence in the market, every point the DOW rises is your dollar losing 1% of it's current value. Inflation just told Thanos 'hold my beer,' as the DOW/S&P values are no longer reflective of market health, but the devaluation of the US dollar. What the FED is doing isn't a new concept, it's a behavior as old as time, and perhaps the best, most recent parallel I can draw to what we're seeing is the Souk Al-Manakh hyper bubble. The US stock market is now completely untethered from reality, and as such the FED has made it crystal clear that they've given up any hope of maintaining the dollar's stability or status as the global reserve currency going into the next 3-5 years. Instead, they will provide stability of value for those at the top who own the stock market so they can plan where to reallocate their value as the global FIAT experiment comes to it's climactic ending. I had hoped (naively) that the FED would realize that by biting the bullet and allowing the markets to decline, they could preserve the dollar's hegemony for at least another decade, if not two. But it's clear they have different plans in mind. Perhaps this is why we've seen the "Digital Dollar" along with a universal basic income method of distribution, being continually reintroduced to the house ever since the first stimulus package. At this point I wouldn't be surprised to find greenbacks being burned to heat people's homes by Christmas as the country is forcefully transitioned onto a new, digital, dollar.
TVC:DJILong
by Jayed
GDP? More Like Debt-Financed ConsumptionNotice the time period where the rate of change began to significantly increase. Sad that TV doesn't have the data but if you go and look, inflation from 1700-1900 was extremely stable. Not the "2%" per year inflation of today, was more like gradual deflation over time, with certainty that your money would be worth the same 100 years from now. During the classic gold standard era, from 1870-1910, real growth averaged 8-10% per year, and we had 3% deflation per year. The banking system of today is based off of printing lots of money, getting caught in a liquidity trap, and then being at risk of a major deflation because you thought you were smart enough to inflate an asset bubble with no consequences. That's where we are at right now. Very similar to 1929.
FRED:CPIAUCSL
by Ludwig_Von_Mises