Category: Inflation
The analysis published under this category are as follows.
Thursday, December 24, 2020
US Fed Recommits to Misleading the Public About Inflation / Economics / Inflation
By: MoneyMetals
Did the Federal Reserve just usher in the next phase of the U.S. dollar’s decline?
On Wednesday, the central bank recommitted to leaving its benchmark interest rate near zero for the foreseeable future.
Fed officials also vowed to keep pumping cash into financial markets.
Following Fed chairman Jerome Powell’s remarks, the wavering U.S. Dollar Index turned down – hitting a fresh new low for the year. Gold gained modestly on the day while silver got a bigger boost to close solidly above $25/oz, promptly heading to $26/oz the day following.
Precious metals markets have been basing out over the past several weeks. They are struggling to attract safe-haven demand amid record runs in stocks and Bitcoin.
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Tuesday, September 15, 2020
Billionaire Hedge Fund Manager Warns of 10% Inflation / Economics / Inflation
By: MoneyMetals
Over the past month, gold has traded in a range with support around $1,900. Bulls have made a couple unsuccessful attempts to retake and hold above the $2,000 level following the sharp plunge below it on August 11th.
But we are likely to see a more decisive move in the gold market one way or the other in the days ahead.
The near-term outlook for precious metals markets may be determined by where the U.S. Dollar Index heads next. It has been basing out since August after trending lower earlier in the summer.
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Friday, September 11, 2020
The Inflation Mega-trend is Going Hyper! / Economics / Inflation
By: Nadeem_Walayat
QE4EVER!
Virtually everything that cannot be easily printed is rocketing higher which includes GOLD! It's not hard to see why as a consequence of rampant money printing by governments across the world in the wake of the Coronavirus Pandemic economic depression. For instance the UK alone looks set to print about £550 billion this year most of which will be monetized by the Bank of England so that the government can pay the wages of about 1/3rd of Britains workforce for a good 6 months with likely many more economic stimulus measures to follow over the next 6 months towards fighting the Pandemics dire economic consequences.
Whilst the United States has printed $2.2 trillion of stimulus dollars to date with at least another $1.3 trillion to come, that's $3.5 trillion which dwarfs the 2008 financial crisis bailout of $720 billion. Funneling stimulus checks on an epic scale into the back pockets of every working age citizen. Printing money has REAL consequences which is REAL inflation hence what we have been witnessing in markets across the spectrum, and whist I have yet to take a peak at the housing markets, I would not be surprised if the UK housing market at least will start to experience a money printing inflationary boom over the coming year, this despite the fact that people have less disposable income to buy housing, but more on that in a future article.
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Thursday, September 10, 2020
Inflation by Fiat / Economics / Inflation
By: Michael_Pento
The Fed has now officially changed its inflation target from 2%, to one that averages above 2% in order to compensate for the years where inflation was below its target. First off, the Fed has a horrific track record with meeting its first and primary mandate of stable prices. Then, in the wake of the Great Recession, it redefined stable prices as 2% inflation—even though that means the dollar’s purchasing power gets cut in half in 36 years. Now, following his latest Jackson Hole speech, Chair Powell has adopted a new definition of stable prices; one where its new mandate will be to bring inflation above 2% with the same degree and duration in which it has fallen short of its 2% target.Just to be clear, the Fed has no idea what causes inflation. It also deliberately goes way out of its way to under measure it. Is it any wonder then that the Fed's historical record proves it has little ability to meet its own inflation target? As I explained in a commentary written a couple of month ago, the Fed has a tremendous amount of difficulty controlling inflation in either direction. In 7 out of the last 12 years, the Fed has been unable to achieve average annualized CPI of at least 2%. Therefore, 58% of the time the Fed has failed to reach its minimum inflation goal. Conversely, inflation spiked to double digits by 1975 and, after a brief pause in ’76-’77, eventually soared to 14.6% by early 1980. During this process, our central bank found it necessary to raise rates from 3.75% in February 1971, all the way to 20% by the middle of 1980. That doesn’t sound like inflation is easily managed does it? But the Fed is fond of trying to convince investors that is the case.
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Sunday, August 23, 2020
CPI Goes Up in July. Will Inflation Dragon Take to the Air with Gold? / Economics / Inflation
By: Arkadiusz_Sieron
CPI rises again in July. But will the inflation dragon take to the air, taking gold with it?The U.S. CPI inflation rate rose 0.6 percent in July, for the second month in a row. The move was driven to a large extent by higher energy prices (the energy index increased 5.1 percent in June as the gasoline index rose 12.3 percent). The core CPI rose also 0.6 percent, following a 0.1 percent drop in May. It was the biggest monthly increase in the core rate since 1991.
On an annual basis, the overall CPI increased 1 percent (seasonally adjusted), following 0.7 percent increase in June. Meanwhile, the core CPI rose 1.6 percent, which implies the acceleration from 1.2 percent recorded in the previous month. So, as the chart below shows, inflation remains low, but it is no longer very low.
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Monday, August 10, 2020
Has the Fed Let the Inflation Genie Out of the Bottle? / Economics / Inflation
By: MoneyMetals
The dramatic ascent of precious metals markets this summer reflects what could be just the start of a longer-term decline and fall in the Federal Reserve Note's value and status.
With gold prices surpassing $2,000/oz recently, the monetary metal has now made new all-time highs versus all the world’s major fiat currencies. Gold is, as former Federal Reserve chairman Alan Greenspan has acknowledged, the “ultimate money.”
The Fed, by contrast, is the ultimate inflator.
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Monday, August 10, 2020
Supply & Demand For Money – The End of Inflation? / Economics / Inflation
By: Kelsey_Williams
A current headline says “fears of currency debasement drive gold price higher”. Seems reasonable; and it is.
Historically, governments have been “debasing” their currencies for centuries. The debasement leads to a loss of purchasing power in the currency in use.
Since gold is original money and has proven itself to be a true store of value, then it should not be unexpected that gold’s higher price over time reflects that currency debasement.
The debasement leads to a loss of purchasing power in the currency in use.
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Wednesday, June 10, 2020
Inflation ‘A mirror image of the early 1980s’ / Economics / Inflation
By: Michael_J_Kosares
“To propose a return of inflation is to be inflammatory,” writes Lightman Investment Management’s Rob Burnett in an opinion piece for the Financial Times. “Investors are committed to a deflationary thesis — and such is their fervor that many believe inflation cannot return in any circumstance. Yet if we look beyond today’s demand shock from the Covid-19 crisis, the forces driving the disinflation of the past 40 years appear to be in retreat. … [T]oday appears like a mirror image of the early 1980s. We have moved from inflation peak to deflation trough.”
Evidence is beginning to mount that the new paradigm Burnett describes – moving from disinflation to inflation – might not be too far off the mark. During the financial crisis that began in 2008, the Fed sterilized its money creation by routing money back to its coffers in the form of commercial bank excess reserves – a strategy that kept the inflation rate from running out of control. As you can see in the first chart, the current level of sterilization, at least in the short term, is greater than what occurred in the 2008-2014 period. At the same time, as you can see in the second chart, the rapid growth in the money supply this time around goes beyond anything that occurred during the prior crisis. Whether or not Burnett is correct and the growth in the money supply translates to price inflation down the road remains to be seen. (Please take note that the growth in the money supply began roughly a year ago – well before the onslaught of the coronavirus pandemic.)
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Tuesday, April 21, 2020
Bending the Inflation Curve / Economics / Inflation
By: John_Mauldin
Our responses to the coronavirus threat, necessary though they may be, are creating massive supply and demand shocks, the rapidity of which is like nothing seen in centuries, if ever.
The Federal Reserve and other central banks are doing unprecedented things. Some think inflation will be the result. While that may happen eventually, I believe we will first go through the most massive deflationary shock of all time.
Milton Friedman famously said, “… inflation is always and everywhere a monetary phenomenon.” During the timeframe in which he and his colleague Anna Schwartz did their famous study, there was clearly a correlation between money supply and inflation. What is not often noted is that the velocity of money (i.e., the rate at which money changes hands) was stable during that time.
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Friday, March 27, 2020
What you need to know about the impact of inflation / Economics / Inflation
By: Submissions
When it comes to investment risks, one that investors seem to overlook is the risk that their money may not be able to grow enough to keep up with inflation. It can play a significant role in the protection of an investment and therefore, should be taken into account when evaluating the potential success of an investment.
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Monday, December 23, 2019
The Fed Celebrates While Americans Drown in Financial Despair / Economics / Inflation
By: John_Mauldin
The Federal Reserve System is supposed to be independent. But it’s not. And as much as Donald Trump doesn’t like it, the Fed shouldn’t follow the president’s orders.
The Fed operates under a legal mandate from Congress. Its monetary policy role is “to promote maximum employment, stable prices and moderate long-term interest rates.”
So how is it doing?
Long-term rates are certainly moderate. Employment is historically high, though wages and job quality aren’t always great.
As for that “stable prices” part… it depends on what you are buying.
Thursday, December 19, 2019
US Fed Wooing Inflation / Economics / Inflation
By: Gary_Tanashian
The Continuum (the systematic downtrend in long-term Treasury yields) has for decades given the Fed the green light on inflation. Sometimes it runs hot (as per the red arrows) and sometimes it runs cold. One year ago people were confused about why a declining stock market was not influencing Fed chief Powell to reverse his relatively hawkish tone.
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Wednesday, December 18, 2019
Inflation Threat Looms in 2020 as Fiscal and Monetary Stimulus Ramp Up / Economics / Inflation
By: MoneyMetals
The Federal Reserve left its benchmark interest rate unchanged as expected last week. However, Fed Chairman Jerome Powell made news with some of his most dovish remarks to date – stating flatly that he won’t hike rates again until inflation moves up significantly.
“In order to move rates up, I would want to see inflation that’s persistent and that’s significant,” Powell said at a news conference following the Fed’s announcement.
He would be anticipating “a significant move up in inflation that’s also persistent before raising rates to address inflation concerns.”
Tuesday, November 05, 2019
Time for Investors to Reset Their Portfolios for Inflation / Stock-Markets / Inflation
By: MoneyMetals
As investors reset their clocks to accord with the end of Daylight Savings Time, they may also need to reset their expectations for future returns.
A strong body of research suggests that artificially changing the time twice a year – forward, then backward an hour – does more harm than good. It leads to sleep disruptions, heightened stress, missed appointments, wasted time (ironically), and a diminishment of productivity around these biannual time changes.
As reported in HeadlineHealth, “Circadian biologists believe ill health effects from daylight saving time result from a mismatch among the sun ‘clock,’ our social clock – work and school schedules – and the body’s internal 24-hour body clock.”
Wednesday, October 30, 2019
2 %: A Magic Number or an Obsession? / Economics / Inflation
By: Submissions
Arf Badeckandy writes: Inflation Targeting (IT) was first adopted in New Zealand in 1990 with a primary goal of price stability. They were going through years of high inflation and slow growth. Initially, they set a target of between 0 to 2 percent. In 1991, the Inflation rate was down to 2.60% from 6.10%. Although there is a cost of disinflation and the Real GDP fell, it recovered. As of August 2019, there are about 71 Central Banks which has adopted an IT Monetary Policy. It can be seen that the authorities are most likely to adopt this policy when their inflation rate is high – to bring it down. Argentina adopted IT in 2016 while the inflation rate was 35.5%, Uganda in 2011 with an inflation rate between 16%-17 %.
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Monday, September 23, 2019
Zimbabwe's New Currency Collapses and Inflation Surges / Economics / Inflation
By: Steve_H_Hanke
The most important price in an economy is the exchange rate between the local currency and the world’s reserve currency — the U.S. dollar. As long as there is an active black‐market (read: free market) for currency and the data are available, changes in the black‐market exchange rate can be reliably transformed into accurate estimates of countrywide inflation rates—if the annual inflation rates exceed 25%. The economic principle of Purchasing Power Parity (PPP) allows for this transformation.
I compute the implied annual inflation rates with high‐frequency data and report them on a daily basis. PPP is used to translate changes in the black‐market exchange rates into annual inflation rates. For the countries that I follow each day, the table below shows the annual rates for the six countries with the highest inflation rates.
Monday, July 01, 2019
Zimbabwe's Inflation is Still Surging / Economics / Inflation
By: Steve_H_Hanke
The most important price in an economy is the exchange rate between the local currency and the world’s reserve currency — the U.S. dollar. As long as there is an active black‐market (read: free market) for currency and the data are available, changes in the black‐market exchange rate can be reliably transformed into accurate estimates of countrywide inflation rates—if the annual inflation rates exceed 25%. The economic principle of Purchasing Power Parity (PPP) allows for this transformation.
I compute the implied annual inflation rates with high‐frequency data and report them on a daily basis. PPP is used to translate changes in the black‐market exchange rates into annual inflation rates. For the countries that I follow each day, the table below shows the annual rates for the five countries with the highest inflation rates.
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Wednesday, June 12, 2019
Perfect Storm Brewing for Price Inflation / Commodities / Inflation
By: MoneyMetals
A “perfect storm” is brewing for midwestern farmers. Unending rains have led to the flooding of tens of millions of acres of farmland. The deluge comes on the heels of years of low crop prices.
It has the makings of an agriculture disaster on a scale never seen before.
The nation may see a “perfect storm” in terms of food inflation. Prices for some farm commodities figure to be a lot higher in the months ahead as markets adjust to dramatically lower crop yields. This will be coupled with price hikes associated with tariffs on all manner of goods from China and elsewhere.
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Wednesday, June 05, 2019
US Inflation and House Prices Trend Forecast / Economics / Inflation
By: Nadeem_Walayat
Official US CPI inflation remains marginally below the Fed's 2% target at 1.9%. Generally where house prices are concerned the higher the inflation rate the better as long as the economy is growing. Nothing much screams out from this chart other than at 2% inflation on balance is supportive of house prices.
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Tuesday, May 14, 2019
Breaking Down Today’s Inflation / Economics / Inflation
By: Rodney_Johnson
I recently had dinner with my extended family. Afterwards, my parents mentioned they were surprised at how expensive the meal had been. It was a nice restaurant, but nothing fancy. It worked out to roughly $50 apiece, before tip. As we left, we separately climbed into our newish cars, which all cost more than $40,000. My brother-in-law’s pickup tops out over $50,000.But don’t worry, the government tells us, there’s not much inflation.
We could have chosen a cheaper restaurant, and less expensive cars, which is exactly the point the government tries to make…
The government wants us accustomed to the chained consumer price index (CPI), where prices move higher and we’re chained to a falling standard of living.
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