This should dispel the notion...
Can’t wait to hear the Chairman justify zero rate policy and deficit monetization with inflation roaring at > 5 percent. It would be entertaining, if it weren’t so damaging.
The price of Lumber is 5x higher than it was 10 years ago.— Charlie Bilello (@charliebilello) April 29, 2021
Fed: "Ignore, Just Transitory." pic.twitter.com/ffR2CKvvQZ
Where To Inflation?
Here’s a pretty good theoretical model (follow the entire thread) estimating that U.S. inflation may reach double digits by Q1 2022. One of the premises is that monetary authorities have no way out of this rabbit hole and are constrained by the risk of severely disrupting financial markets in an asset dependent economy.
Recall our view that deflation/inflation is a corner solution and Wall Street’s “Goldilocks” scenario is still just a marketing gimmick. Deflation as markets try to move back to mean valuations – a lot lower – or inflation, and lots of it.
19/n— Lars Christensen (@MaMoMVPY) April 29, 2021
What this simulation tells us is that we should see a very, very sharp increase in US inflation in the coming months and inflation could be heading above 12% by the end of the year.
Anyone with a better model, lay it on the table. Stop with the “fake news” or “don’t worry” nonsense. CPI prints > 4 percent in May and you heard it here first.