Why Inflation Will Reignite

Authored by GoldFix ZH Edit

One thing mentioned often enough here is the opinion inflation will remain sticky over the next few years. That begs the question why.. Here are a couple possible reasons culled from research being done into answering that question. One reason is Perception. The other is the math that supports much higher inflation tolerances or  much higher unemployment now. First Perception.

Fighting inflation is like rolling up a ball of string in your hand. One slip and gravity sets you back years re-rolling.it.

That’s a comment on inflation expectations/perceptions getting ruined, as opposed to actual data seen.A whole generation just sh*t themselves not even knowing inflation was a thing. Now there’s a new monster under their bed to worry about.A monster they won’t they won’t soon forget no matter how hard the media tries to make them.

Every time something is bought, millennials are reminded of inflation now by the legacy change in prices that shocked them. It’s baked in because those prices won’t come back down. They may stop going up, but they’re remaining elevated is a constant reminder of the risk of re ignition. They are now sensitized to it.

It took a decade to get inflation under control last time. Why?

This is why gov’t constantly talks about inflation rates as if getting inflation under control also gets prices down? It doesn’t.

Those newly born inflationary perceptions are 50% of the battle in actually fighting inflation… The Fed tries to cure you of that opinion despite the prices you see daily. Failing to do that, they try to get you to accept lower standards of living. They are already trying that. Watch it ramp up this winter.

 

The other 50% of getting inflation under control are unions and fiscal spending.. Those cats are out of their bags now and in early stages of growth. This is the beginning of their inflationary contribution, not the end.

The Fed knows this.. and to get inflation back near its 10yr moving average in a timely fashion.. is to make it go under 2% and they literally cannot do that without ending us economically or starting WW3.That is why the long bond yield has risen up to 5%, losing 50% of its buying power in 9 months.Get used to 4% base. Unless AI kicks in tomorrow.

The kicker?.. Empirically speaking: Oil prices were NOT why we had such persistent stagflation in the 1970s.. Decoupling from Gold was.

Here is a related post from Sept 2022 on the math of it all.