Originally Posted by Markola
People have been predicting major inflation seemingly since Paul Volker yet here we are with the markets absolutely freaking out today because we MIGHT hit 2% inflation, according to Chair Powell’s remarks today. One can say that “narratives” don’t matter but we need an explanation for years and years of massive stimulus not leading to inflation. My money is on the narrative of technology and globalization demolition prices over the last several decades. YMMV.
The reason years and years of QE not leading to inflation is that the money supply did not expand. Now we are at a 45 year high by a factor of 100% higher rate of growth in money in any time since 1960. In the last year the Federal Government only funded 43% of their expenditures and it is expected to be far less this year, and money is being given to all citizens. That is right in 2020 57% of all spending by the US govenrment was added to the deficit.
For inflation not to happen the money supply has to stop growing which would mean the economy would slump exponentially. Federal Reserve will have no choice but to continue to offer lower rates while massive fiscal stimulus is also under way. This is what Powell basically said today, and Powell is an extremely poor spokesman for a crisis. The Federal Reserve controls everything until the day people realize they don't have control, CRB index is up 14% in two months, tracking the flow of money.