Cool Breeze wrote: Thu Aug 19, 2021 11:49 am
Vince, do you think they'll taper?
What do you say inflation gets to (even with the BS cpi number) by Q2 2022?
Yes, I think they will reduce bond purchases a bit, while stressing that they are not raising interest rates. But at some point the market will start to raise long term interest rates.
I don't know how fast the CPI will go up, but I think it will keep going up as long as interest rates are well below the inflation rate.
At some point the Fed will declare "the market is broken" after there are no buyers of long term bonds and rates are shooting up. This will really be because rapidly rising inflation rates makes long term bonds something no rational investor would hold. So the Fed will try to "calm the market" by buying all sorts of long term bonds. Then huge numbers of bond holders will sell and the Fed will print many trillions, and we get hyperinflation. Just a question of timing. My guess is we pass 20% inflation in less than 3 years.
Cool Breeze wrote: Thu Aug 19, 2021 11:49 am
Vince, do you think they'll taper?
What do you say inflation gets to (even with the BS cpi number) by Q2 2022?
Yes, I think they will reduce bond purchases a bit, while stressing that they are not raising interest rates. But at some point the market will start to raise long term interest rates.
I don't know how fast the CPI will go up, but I think it will keep going up as long as interest rates are well below the inflation rate.
At some point the Fed will declare "the market is broken" after there are no buyers of long term bonds and rates are shooting up. This will really be because rapidly rising inflation rates makes long term bonds something no rational investor would hold. So the Fed will try to "calm the market" by buying all sorts of long term bonds. Then huge numbers of bond holders will sell and the Fed will print many trillions, and we get hyperinflation. Just a question of timing. My guess is we pass 20% inflation in less than 3 years.
CPI number suggesting 20%? Or sober analysis of the cost of living.
So you see many things "happening" in the world in the next 2-3 years, I would assume.
No doubt market crashes and hyperinflation will cause lots of other problems. I think this is the "generational crisis" we are in for.
I think the world leaving the dollar and moving to Bitcoin is how we get out of the crisis. The USD won't be accepted as money, at least internationally. But this leaves the USA broke like never before, since they can't print money any more. So the USA will be a mess long after the rest of the world has recovered.
Last edited by vincecate on Thu Aug 19, 2021 3:59 pm, edited 1 time in total.
vincecate wrote: Thu Aug 19, 2021 12:42 pm
> At some point the Fed will declare "the market is broken" after
> there are no buyers of long term bonds and rates are shooting up.
> This will really be because rapidly rising inflation rates makes
> long term bonds something no rational investor would hold. So the
> Fed will try to "calm the market" by buying all sorts of long term
> bonds. Then huge numbers of bond holders will sell and the Fed
> will print many trillions, and we get hyperinflation. Just a
> question of timing. My guess is we pass 20% inflation in less
> than 3 years.
Why stop there? Why not go to 50%? 100%? Go big or go home.
No doubt market crashes and hyperinflation will cause lots of other problems. I think this is the "generational crisis" we are in for.
I think the world leaving the dollar and moving to Bitcoin is how we get out of the crisis. The USD won't be accepted as money, at least internationally. But this leaves the USA broke like never before, since they can't print money any more. So the USA will be a mess long after the rest of the world has recovered.
I tend to think this is the clearest crisis that will happen. Wars might, but they have so many moving peoples/parts they are hard to predict in any detail. That's why John gets mad when I ask so many questions on why it hasn't happened yet, and still he can't explain why it hasn't, or when it will.
John wrote: Thu Aug 19, 2021 3:58 pm** 19-Aug-2021 World View: 100% inflation
vincecate wrote: Thu Aug 19, 2021 12:42 pm
My guess is we pass 20% inflation in less than 3 years.
Why stop there? Why not go to 50%? 100%? Go big or go home.
Oh, it will keep going higher. We will pass 50% and 100% as well. But it might take another year or two more.
Great one from your blog here (the hyperinflation FAQ), Vince, on a topic I've talked about a lot here ...
Doesn't the deleveraging of huge private debt prevent hyperinflation? Can you have deflation and hyperinflation at the same time?
If you define deflation in terms of the money supply, and you count bonds as part of the money supply, then you predict deflation when people are deleveraging. Many people seem to see deflation coming, by this definition, and think that means you can not get hyperinflation. This is not correct. Hyperinflation is defined in terms of "price inflation" not "money supply including credit". At the start of all hyperinflations bond values crash, so this definition of deflation will be met even as prices are shooting up. So it is common to have deflation and hyperinflation at the same time, initially. If inflation is 5% per month then a bond that pays 2% per year for 10 years is worth less than a penny on the dollar. The bond collapse happens fast and the hyperinflation can go on for awhile. History books will later say it was hyperinflation, not deflation.
Cool Breeze wrote: Thu Aug 19, 2021 7:00 pm
Great one from your blog here (the hyperinflation FAQ), Vince, on a topic I've talked about a lot here ...
Doesn't the deleveraging of huge private debt prevent hyperinflation? Can you have deflation and hyperinflation at the same time?
If you define deflation in terms of the money supply, and you count bonds as part of the money supply, then you predict deflation when people are deleveraging. Many people seem to see deflation coming, by this definition, and think that means you can not get hyperinflation. This is not correct. Hyperinflation is defined in terms of "price inflation" not "money supply including credit". At the start of all hyperinflations bond values crash, so this definition of deflation will be met even as prices are shooting up. So it is common to have deflation and hyperinflation at the same time, initially. If inflation is 5% per month then a bond that pays 2% per year for 10 years is worth less than a penny on the dollar. The bond collapse happens fast and the hyperinflation can go on for awhile. History books will later say it was hyperinflation, not deflation.
Thanks.
That was really from an argument with Mike "Mish" Shedlock like a decade ago. I note these days he seems a bit worried about inflation:
Another guy I argued with long ago was Cullen Roche. He is basically an MMT guy. He was not at all worried about inflation in 2009 but these days he seems a bit worried:
