quote:

Conclusion

We worry that inflation will make a comeback. Few still remember how our societies and economies were threatened by high inflation 50 years ago. The most basic laws of economics, the ones that have stood the test of time over a millennium, have not been suspended. An explosive growth in debt financed largely by central banks is likely to lead to higher inflation. We worry that the painful lessons of an inflationary past are being ignored by central bankers, either because they really believe that this time is different, or they have bought into a new paradigm that low interest rates are here to stay, or they are protecting their institutions by not trying to hold back a political steam roller. Whatever the reason, we expect inflationary pressures to re-emerge as the Fed continues with its policy of patience and its stated belief that current pressures are largely transitory. It may take a year longer until 2023 but inflation will re-emerge. And while it is admirable that this patience is due to the fact that the Fed’s priorities are shifting towards social goals, neglecting inflation leaves global economies sitting on a time bomb.

It is a scary thought that just as inflation is being deprioritized, fiscal and monetary policy is being coordinated in ways the world has never seen. Recent stimulus has been extraordinary and economic forecasting, which is difficult at the best of times, is becoming harder by the day. Fractured politics amplifies the problem. Needless to say, the range of global outcomes over the coming years is wide.

When central banks are eventually forced to act on inflation, they will find it themselves in a difficult, if not untenable, position. They will be fighting the increasingly-ingrained perception that high levels of debt and higher inflation are a small price to pay for achieving progressive political, economic and social goals. That will make it politically difficult for societies to accept higher unemployment in the interest of fighting inflation.

Eventually, though, any social priorities that policymakers have will be set aside if inflation returns in earnest. Rising prices will touch everyone. The effects could be devastating, particularly for the most vulnerable in society. Sadly, when central banks do act at this stage, they will be forced into abrupt policy change which will only make it harder for policymakers to achieve the social goals that our societies
need.

Low, stable inflation and historically low interest rates have been the glue that have held together macro policy for the last three decades. If, as we expect, this starts to unravel over the next year or two, then policymakers will face the most challenging years since the Volcker/Reagan period in the 1980s.

quote:

Originally posted by WaterburyBob:
Our 401K accounts will be worth so much less because of this nonsense.

quote:

Originally posted by Flash-LB:

quote:

Originally posted by WaterburyBob:
Our 401K accounts will be worth so much less because of this nonsense.

Maybe and maybe not. My IRAs are going up like a rocket.

quote:

Originally posted by Flash-LB:

quote:

Originally posted by WaterburyBob:
Our 401K accounts will be worth so much less because of this nonsense.

Maybe and maybe not. My IRAs are going up like a rocket.

quote:

Originally posted by WaterburyBob:
Our 401K accounts will be worth so much less because of this nonsense.

quote:

Originally posted by RichardC:
Buy gold?

quote:

Originally posted by sig 226:

quote:

Originally posted by RichardC:
Buy gold?

Assuming you are serious, yes PM as part of a diversified plan is a good idea.

quote:

The most basic laws of economics, the ones that have stood the test of time over a millennium, have not been suspended. An explosive growth in debt financed largely by central banks is likely to lead to higher inflation. We worry that the painful lessons of an inflationary past are being ignored by central bankers, either because they really believe that this time is different, or they have bought into a new paradigm that low interest rates are here to stay, or they are protecting their institutions by not trying to hold back a political steam roller. Whatever the reason, we expect inflationary pressures to re-emerge as the Fed continues with its policy of patience and its stated belief that current pressures are largely transitory. It may take a year longer until 2023 but inflation will re-emerge. And while it is admirable that this patience is due to the fact that the Fed’s priorities are shifting towards social goals, neglecting inflation leaves global economies sitting on a time bomb.

quote:

Does anyone else get this strange and uncomfortable feeling in their gut that we are in the calm before the storm?