Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Where’s my self-driving car? - 16th Aug 22
Real Reason why Pakistan and India Gained Independence in 1947 at 75th Anniversary - 16th Aug 22
Electronic Payments Can Benefit Your Business - Here’s How - 16th Aug 22
Qualcom Stock Market Harbinger - 12th Aug 22
Apple Exec Gets World's 1st iPhone 14 for Daughters 14th Birthday Surprise Present Unboxing! - 12th Aug 22
Steps to remember while playing live roulette online - 12th Aug 22
China Bank Run Protests - Another Potential Tiananmen Square Massacre? - 11th Aug 22
Silver Coin Premiums – Another Collapse? - 11th Aug 22
Gold-to-Silver Ratio Heading Lower – Setup Like 1989-03 - 11th Aug 22
Severe Stocks Bear Market: Will You Be Among the Prepared 1.5%? - 11th Aug 22
There's a Hole in My Bucket Dear Liza, UK Summer Heatwave Plants Watering Problem Song - 11th Aug 22
Why PEAK INFLATION is a RED HERRING! Prepare for a Decade Long Cost of Living Crisis - 9th Aug 22
FREETRADE Want to LEND My Shares to Short Sellers! - 8th Aug 22
Stock Market Unclosed Gap - 8th Aug 22
The End Game for Silver Shenanigans... - 8th Aug 22er
WARNING Corsair MP600 NVME2 M2 SSD Are Prone to Failure Can Prevent Systems From Booting - 8th Aug 22
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
WHY PEAK INFLATION RED HERRING - 5th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
SILVER’S BAD BREAK - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Inflation Going Stag

Economics / Stagflation May 16, 2021 - 06:31 PM GMT

By: Gary_Tanashian

Economics

Stagflation in the offing, unless it’s not different this time…

As corporations continue to raise wages, market participants fear the Fed is wrong about supposedly “transitory” inflation, long-term Treasury bond yields resume the rally (bonds decline) manufacturers’ (ISM) costs keep rising, the Fed’s inflationary operation – a desperate monetary kick save if ever there was one – labors on.

The Fed has manipulated bonds and flooded the markets and the economy with funny munny created out of nowhere, as if by magic. As if by MMT (modern monetary theory) TMM (total market manipulation). So far, so good. Jerome Powell stands to be the first non-Bernanke winner of the Ben Bernanke Award for Heroism in the line of inflating a debt ridden economy.


Since becoming bullish on the inflation trades last summer after the worst of the deflation scare had played out (notice the spike down on the chart that jerked Powell 100% unequivocally dovish), the expectation has been for this ‘good’ inflation to eventually be replaced by one of two things (using the 30yr Treasury Yield Continuum of dis-inflationary macro signaling as a guide)…

1) another logical deflationary liquidation of the excess as per the Continuum’s history or 2) a ramp up in inflationary pressure on the economy from which the Fed does not back off, an all-in double down on the inflation trades, which would instigate yields to do what they have not done in the history of my handy chart above. That would be to go Stag in the next phase of the ‘flation’.

From Trading Economics, here is the graphical picture as inflation’s cost effects launched in April (despite April’s suspect Payrolls Report) and wigged the markets out pretty good (but has not yet broken them).

Bonds manipulated → (funny) munny printed → government taxing and spending (as if the munny is free) → costs rising → manufacturers and services PUSHING those costs into the economy → get ready for our combative antlered friends above to make the scene if the Continuum disregards the monthly EMA 100 & 120 limits this time.

Different this time or same this time? Pick your poison. The usual deflationary resolution (bust) or a ramping of inflation into the economically destructive kind, where cost pressures get out of hand and pressure businesses, consumers and supply chains?

We are already seeing Stagflationary pressure in the above linked ISM report, in Semiconductor supply shortages, in seemingly unavailable labor, in FOOD (as NFTRH has tracked and I have traded/invested in since last year, the Agricultural sector is on a big time cyclical bull). Other necessities will no doubt become more expensive; both products and services if a blessed deflationary resolution is not in the offing (this time).

In short, and in my normal everyday language, the economy would fly up its own ass in a spiral of rising costs while today’s inflation proponents suffer a case of ‘be careful what you ask for, you just might get it’. We are approaching the decision point between the usual dis-inflationary or deflationary resolution to a willfully man-made inflationary operation, or uncharted territory.

Well, it is charted; in the words of Ludwig von Mises.

But as surely as a 2008 style deflationary episode would be a resolution, so too would be an inflationary Crack-Up Boom or short of that, the Fed staying on the inflationary gas pedal for too long.

Hyperinflation, Money Demand and the Crack-Up Boom

Mises’s policy advice was instrumental in helping to stop hyperinflation in Austria in 1922. In his Memoirs, however, he expressed the view that his instruction — halting the printing press — was heeded too late:

“Austria’s currency did not collapse — as did Germany’s in 1923. The crack up boom did not occur. Nevertheless, the country had to bear the destructive consequences of continuing inflation for many years. Its banking, credit, and insurance systems had suffered wounds that could no longer heal, and no halt could be put to the consumption of capital.”

As posted the other day, market signals say it’s still inflation ‘on’ and by extension, risk on. The Fed has, after all, instigated us into risk ‘on’ mode by increasing the supply (reducing the value) of the monetary unit that generally settles the global macro inflation/economic reflation trades…

…by bloating its balance sheet as needed.

As the Continuum above continues to indicate inflationary pressure, another deflationary liquidation or a gateway to uncharted inflationary territory awaits at the Continuum’s limiters.

I have been asked by a subscriber (of note, due to his experience in professional fund management) to consider not highlighting my macro tools in public, and I usually don’t give away the fine details. But we (NFTRH) have been successfully managing the inflation for a year. I think it is timely now to use one indicator, one of my most important indicators, to offer a pubic guide to a macro decision point out ahead that will be for all the marbles where determining forward strategy is concerned.

For “best of breed” top down analysis of all major markets, subscribe to NFTRH Premium, which includes an in-depth weekly market report, detailed interim market updates and NFTRH+ dynamic updates and chart/trade setup ideas. You can also keep up to date with actionable public content at NFTRH.com by using the email form on the right sidebar. Follow via Twitter ;@NFTRHgt.

By Gary Tanashian

http://biiwii.com

© 2021 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in