Gyroscopic Investing

What’s different about this situation versus the inflation that Volcker fought?

Jack Jones wrote: ↑Thu Jun 16, 2022 3:52 pm
What’s different about this situation versus the inflation that Volcker fought?

Compare all the prior years' inflation for each time period:

https://www.thebalance.com/u-s-inflatio ... st-3306093



In the spring of 1980 I taught two sections of Managerial Accounting at the University of Massachusetts. Part of that was inflation accounting. During one of the classes I told the students what prices I'd experienced for various items (blue jeans, bleacher tickets at Fenway Park, gallon of gas) I'd experienced in 1969. They could not believe those prices in relation to their presents costs in 1980.

What examples can you give for 2022 in comparison to 2011 that would be similar?

By the way ... in 1969 Levis were $5 and Wranglers / Lees were $4. It cost $1 to sit in the bleachers at Fenway Park. Finally, the cost of a gallon of gas was about $0.15.

Fed has been captured. They get millions in speaking fees from Wall St

The level of debt seems like a significant difference:

https://www.longtermtrends.net/us-debt-to-gdp/

Does this limit how high it can raise interest rates to combat inflation?

Jack Jones wrote: ↑Fri Jun 17, 2022 4:58 am The level of debt seems like a significant difference:

https://www.longtermtrends.net/us-debt-to-gdp/

Does this limit how high it can raise interest rates to combat inflation?

Or would it incentivize the fed to inflate the debt away?

BTW that longtermtrends site seems freaking amazing.

joypog wrote: ↑Fri Jun 17, 2022 8:55 am

Jack Jones wrote: ↑Fri Jun 17, 2022 4:58 am The level of debt seems like a significant difference:

https://www.longtermtrends.net/us-debt-to-gdp/

Does this limit how high it can raise interest rates to combat inflation?

Or would it incentivize the fed to inflate the debt away?

BTW that longtermtrends site seems freaking amazing.

Agree! There are some interesting charts in that site for sure. The Buffett indicator chart is pretty ominous.

On inflation, there is a lot of thought and controversy on where the tipping point lies in terms of debt/gdp. I have heard 130% many times. We have been close to that number. But then no G7 country has taken QE as far as Japan, whose debt/gdp is around 240%. And to add to it, they announced yesterday that they are keeping QE in place, with interest rates unchanged, and YOY inflation at 1.9%.

OTOH, there is a concern that the yields necessary to make the market for government debt rise, there would be a point where debt service will be the majority of the government's annual budget. So there has to be a practical limit somewhere.
You would think the US with reserve currency status and sheer scale, would have advantages over Japan. A lot of paradoxes are going on. The only thing clear to me is the Fed is in a quandary.

There's a discussion elsewhere in this forum about velocity of money, and indeed the velocity of money in Japan is very low despite the QE. After the QE in 2008 the velocity of money in the US didn't increase a lot because much of the easing ended up on bank balance sheets to keep the financial system afloat, and since most of the money stayed there, it didn't end up in the economy.
In 2020 the easing took the form of PPP money that was handed out to companies and other CARES act benefits that went directly into the economy, so maybe that's the difference.

What surprises me is how impactful the war in Ukraine seems to be. Not that it's insignificant, but for that war to be adversely affecting the whole western economy is surprising. What if China decided to outright invade and seize Taiwan? To me that's a way bigger deal. Could you imagine the supply shock and economic disruption that would come from that?

This is the first time in a while I've felt better about my PP than my VP, even though the PP is not unscathed.

Inflation will go as high as gov can get away with. The cohesive Japanese culture tolerates smaller homes and cars. They store cash to avoid negative rates, and build housing in high demand areas (lax zoning). I dunno why Biden is waiting to hand out gas credits like Venezuela. And China is demonstrating marvelous new policies to suppress the population. https://www.reuters.com/world/china/chi ... 022-06-14/

https://dailysceptic.org/2022/06/17/fra ... rotestors/