Issue # 71
Transitory as in not permanent, temporary or brief in duration.
Inflation continues to move higher and that is forcing many to reconsider whether it is indeed transitory in nature or more permanent. Last week we saw the highest inflation numbers in more than 20 years at + 6.2% Y.O.Y.
We have all seen the high gas prices, but it is particularly bad here in California where you will consistently pay more than $5 per gallon to fill up your tank. And in many parts of the state prices are approaching $6 per gallon.
But it is not just higher energy prices that are driving up inflation numbers. It is a broad based increase in everything from household items to used cars, I wrote about the latter in a previous post here.
This is not just a US based phenomena, we are seeing higher inflation numbers across the globe. Australia is at 3%, the United Kingdom is at 3.1%, Germany is at 4.5%, Spain is at 5.4%, South Africa is 5%, Canada is at 4.4%, Mexico is at 6.2%, etc. Every country reported increasing inflation.
There are many reasons for the higher inflation numbers that we are experiencing, the pandemic and poor policy making decisions are chief among them. Adding trillions of dollars of spending and operating massive Quantitative Easing programs doesn’t help!
From Goldman Sachs, “The volume of securities purchased in COVID-era is significantly larger than the volume purchased during GFC-era Quantitative Easing (QE). The Fed has increased its securities holdings by ~$4.1trn since early March 2020, a significant pace compared to the ~$3.7trn increase during the almost six years of QE that followed the GFC”.
There is a lot of new money in the system and it is manifesting in many different forms. It is pushing investors out the risk curve in search of yield and higher returns and it appears to also be acting as a catalyst for higher inflation numbers.
So is inflation transitory or more permanent?
I would argue that we know how to reduce inflation, it is well documented in academic literature. But, until the policy makers are willing to take action and risk having unhappy voters, inflation will remain a menace.
FRED EHRSAM - Episode 2: Creators, Communities and Crypto
In this episode Fred Ehrsam sits down with Blake Robbins and Jesse Walden to revisit their conversation on how crypto can enable creators and communities, one year later. Hat tip to Sharam Honari who sent this one my way!
YouTube Interview with LACY HUNT: Inflation today, deflation tomorrow.
In this episode Lacy Hunt, one of the world’s top experts on the inflation / deflation makes a very compelling argument why the spike we’re seeing in inflation today will likely be short-lived, and that deflation remains the bigger threat.
Hat tip to Jelly Donut on Twitter for sharing this one, definitely worth a follow!
No more conferences until 2022. I plan to use the down time to catch up on my reading list.
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