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Incoming CPI inflation? A thread
Since QE alone only equals bank recapitalization and increased base money, it can never cause CPI inflation. For example, during the financial crisis we witnessed the FED aggressively expand their balance sheet with no sight of increased CPI.
Since QE alone only equals bank recapitalization and increased base money, it can never cause CPI inflation. For example, during the financial crisis we witnessed the FED aggressively expand their balance sheet with no sight of increased CPI.
For higher levels of CPI, QE must be implemented along with fiscal stimulus (deficit spending). This can be done by tax breaks, stimulus checks, or anything that will increase money in the hands of consumers (broad money). -->
This is exactly what happened recently during the pandemic, government deficit spending through stimulus checks. So why is there still no action in CPI? Well, i belive there are several deflationary forces that are still around such as: -->
Tons of USD denominated debt = USD demand, Petrodollar still on, Tech = Deflationary, and probably the most important: #Velocity of M2 has not recovered to normal levels since the breakout of covid.
My belief is that we'll see increased levels of CPI as soon as velocity recovers. When/If that happens, it will drag real rates even further down in negative territory which historically have been favorable for #gold. -->
When it comes to stocks during inflationary environments, the debate is often about Value vs Growth, where value is considered preferred. However, the pricing power of the business might be a more central factor rather than which rate the top-line grows at.
