I didn't watch the whole video, but it seems unlikely we will go from 8% plus inflation to deflation quickly. The U.N. is predicting worldwide food shortages in part stoked by the Ukraine war. There is only one candidate for every two jobs in the U.S. right now. That won't likely change quickly unless there is a recession, where there are less jobs and some people will come out of retirement due to stock market losses.
The last time we had deflation was after the 2008 recession and then it was pretty brief. If we do have deflation will likely be a good bet to buy long duration TIPS because the real yields will go up to 2 - 3% again, and prolonged deflation is pretty unusual in the U.S., except for after the Great Depression. Even then it lasted only a few years.
Inflation in the US is a 20th (and now 21st) century phenomenon. The country had decreasing prices between 1815-1860 and 1865-1900. We have been conditioned that falling prices are bad.
Think of it this way - let's pretend that we could have a magic thing that represented deferred spending (money). Further imagine that the supply of that magic token was limited, and guaranteed (magically) to only grow (in supply) with the growth of population, i.e. the # of these magical money tokens per capita was somehow set. Now, as time progresses, there is learning and innovation. We learn how to make things more efficiently, we invent things that help us do that, to become more productive. Given this, one would expect over the long run that the cost of goods would be lower...because we are more productive at creating them. While the cost of services might not drop as much, they too should drop as those services become easier to produce (in terms of human capital). Thus, prices should (in the long turn) fall at about the same rate as productivity increase.
Now unfortunately we don't have that magic thing. We have other things that have some of those attributes (e.g. Gold in terms of approximate supply, Fiat currency in terms of "guarantee" of use but not in term of supply). So here we are, with debt determined via fiat, and government who has incentive to devalue the currency over time (aka Inflation).
I like to think of this as "Ka-BOOM". That is, in a downturn we go from "return on investment" to thinking of "return OF investment", and that is deflationary. We take less risk and like the falling water levels in Lake Mead, the bodies rise to the surface. (That's my sarcastic way of saying the companies that have too much leverage fail, and the consumers that have too much leverage go bankrupt). That is the "Ka" part.
But I feel/think/believe we have a government that will do everything it can if a severe downturn occurs to stop it - at any cost. And the easiest approach (to prevent another 1929-1940) situation is to turn on the money printing presses. So here's a wild a*s prediction - the Fed will stop tightening by the end of the year, declare "victory", by the end of the year...even though they haven't even done ANY QT activities yet (scheduled to start in June). That is the "Boom" part.
