The great INFLATION debate
Chart: action reaction chart off major pivots
Here we are looking at breakeven inflation and inflation protected securities
People buying inflation hedges (including gold) are getting rekt
******************************************************************************************************************************
I used to believe in hyperinflation and a dollar reset too
But this isn't going to happen (yet)
For nigh on 40 years, economic growth per capita (nominal AND inflation-adjusted real) has been in a downtrend.
This coincides with the 40 year bull market in long term government bonds.
For around a quarter-century: the GDP generated /dollar of the money supply has fallen; and this demise is accelerating.
The velocity of money ( M2V ) has crashed post-pandemic, and it is at a 100 year low; this is not consistent with persistent inflation /hyperinflation.
The money multiplier is falling because banks can't lend productively, and are parking cash at the Federal Reserve .
MRDP (marginal revenue product of the debt) is at an all-time low: currently around $0.25 of GDP per dollar of debt.
The dollar itself stays strong because the rest of the world is even more indebted and less productive (with lower MRDPs).
Demographics and Debt will both continue to subsume growth, with the EU especially affected by demographics.
Markets are in a bubble because we are at peak debt and peak growth.
As soon as reality bites: equities will be the first to suffer. The dollar will just get stronger mid term.
G.R.I. Dec 2021
With thanks to Lacy Hunt (Hoisington) and Eric Basmajian (EPB Research) for all their work on the above
NOTE: the views expressed above are my own, AND MUST NOT BE CONSTRUED AS ANY FORM OF ADVICE
Here we are looking at breakeven inflation and inflation protected securities
People buying inflation hedges (including gold) are getting rekt
******************************************************************************************************************************
I used to believe in hyperinflation and a dollar reset too
But this isn't going to happen (yet)
For nigh on 40 years, economic growth per capita (nominal AND inflation-adjusted real) has been in a downtrend.
This coincides with the 40 year bull market in long term government bonds.
For around a quarter-century: the GDP generated /dollar of the money supply has fallen; and this demise is accelerating.
The velocity of money ( M2V ) has crashed post-pandemic, and it is at a 100 year low; this is not consistent with persistent inflation /hyperinflation.
The money multiplier is falling because banks can't lend productively, and are parking cash at the Federal Reserve .
MRDP (marginal revenue product of the debt) is at an all-time low: currently around $0.25 of GDP per dollar of debt.
The dollar itself stays strong because the rest of the world is even more indebted and less productive (with lower MRDPs).
Demographics and Debt will both continue to subsume growth, with the EU especially affected by demographics.
Markets are in a bubble because we are at peak debt and peak growth.
As soon as reality bites: equities will be the first to suffer. The dollar will just get stronger mid term.
G.R.I. Dec 2021
With thanks to Lacy Hunt (Hoisington) and Eric Basmajian (EPB Research) for all their work on the above
NOTE: the views expressed above are my own, AND MUST NOT BE CONSTRUED AS ANY FORM OF ADVICE
Comment:
Gold added
