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Counterintuitive Take On Inflation
Last edited Thu Nov 11, 2021, 08:34 PM - Edit history (1)
You think the U.S. will get hyperinflation? There’s a better chance that interest rates will go to zero
But what if rates don’t rise? What if the inflation that everyone is currently worried about doesn’t persist? What if the U.S. looks a lot more like Germany and Japan than Zimbabwe or Argentina?
In other words, what if long-term U.S. interest rates are on a slow march to zero percent? This is a fairly contrarian view at this point, but far more likely, in my opinion, than the possibility of hyperinflation.
The basic theory is this:
Fiscal policy combined with Federal Reserve intervention causes inflation (in the short term).
Every time the government and the Fed step off the gas with their policies, the suffocating secular deflation trends of tech growth, globalization, demographics and inequality reinforce the downward trend in inflation and interest rates.
The economy slows, the Fed and Treasury respond at some point with some more intervention. Rinse, wash, repeat as the secular trends suffocate these government interventions.
But what if rates don’t rise? What if the inflation that everyone is currently worried about doesn’t persist? What if the U.S. looks a lot more like Germany and Japan than Zimbabwe or Argentina?
In other words, what if long-term U.S. interest rates are on a slow march to zero percent? This is a fairly contrarian view at this point, but far more likely, in my opinion, than the possibility of hyperinflation.
The basic theory is this:
Fiscal policy combined with Federal Reserve intervention causes inflation (in the short term).
Every time the government and the Fed step off the gas with their policies, the suffocating secular deflation trends of tech growth, globalization, demographics and inequality reinforce the downward trend in inflation and interest rates.
The economy slows, the Fed and Treasury respond at some point with some more intervention. Rinse, wash, repeat as the secular trends suffocate these government interventions.
More:
https://www.marketwatch.com/story/you-think-the-u-s-will-get-hyperinflation-theres-a-better-chance-that-interest-rates-will-go-to-zero-11636556375
~
Remember, there was deflation from 2007-2008 going forward, which eventually became only disinflation. The Fed tried for years to get inflation up to 2.2%. The strong overall disinflation forces remain strong.