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This will be my last post on inflation and macro for a while as the markets are now re-opened for the New Year.
Europe is increasing their money supply significantly. Not to financial firms, but to the man in the street, via government guaranteed loans for all manner of items, not least real estate. Banks will (which has been absent since the 2008 crisis) now lend to the man on the street. This is an increase in money/credit that will become inflationary when combined with other variables.
US savings rate. Historically high due to (a) stimulus cheques and (b) nowhere to really spend it, other than paying down debt, which has accounted for the drop already. When the US and world re-opens, the man-in-the-street will have cash and the ability in Europe, to get more.
Inventories are low. We have a supply/demand mismatch going forward.
US Banks are also loosening up. The higher the number, the tighter credit. US Banks are going to expand credit to our chap-in-the-street. Inflationary.
Again, many of these are government backed. There is still $600B waiting to be loaned out to small businesses.
Wage growth is critical. The election was about Blue Collar. Both parties need to create wage growth (inflationary) and will do so via policy.
China is potentially set to implode. The Yuan is a managed currency. To be so, China must attract capital inflows. Given that their export machine has hit a glitch, they need capital inflows from an alternative source. Will it happen? Too early to tell, but if it does not, China will have some really major issues.
With the new Cold War heating up, China is in a quite precarious position. Their position is now vis-a-vis the West, one of a gigantic bluff. By ostracising China, a very potent disinflationary force is reversed. The result: increased inflationary pressures.
Capital controls are coming. They have a new name: Macro Prudential Regulation. They are yield curve caps. This is also highly inflationary. Counter-intuitively, I see the US$ strengthening. Europe and the Euro are at odds internally. German debt is 200% of GDP, French debt at 400% of GDP. How can that be reconciled? There will (I think) be capital flight out of the Euro into the US$. China wants those capital inflows, but I don't think they will go to the Yuan denominated assets.
Which leaves Gold/Crypto.
jog on
duc
Europe is increasing their money supply significantly. Not to financial firms, but to the man in the street, via government guaranteed loans for all manner of items, not least real estate. Banks will (which has been absent since the 2008 crisis) now lend to the man on the street. This is an increase in money/credit that will become inflationary when combined with other variables.
US savings rate. Historically high due to (a) stimulus cheques and (b) nowhere to really spend it, other than paying down debt, which has accounted for the drop already. When the US and world re-opens, the man-in-the-street will have cash and the ability in Europe, to get more.
Inventories are low. We have a supply/demand mismatch going forward.
US Banks are also loosening up. The higher the number, the tighter credit. US Banks are going to expand credit to our chap-in-the-street. Inflationary.
Again, many of these are government backed. There is still $600B waiting to be loaned out to small businesses.
Wage growth is critical. The election was about Blue Collar. Both parties need to create wage growth (inflationary) and will do so via policy.
China is potentially set to implode. The Yuan is a managed currency. To be so, China must attract capital inflows. Given that their export machine has hit a glitch, they need capital inflows from an alternative source. Will it happen? Too early to tell, but if it does not, China will have some really major issues.
With the new Cold War heating up, China is in a quite precarious position. Their position is now vis-a-vis the West, one of a gigantic bluff. By ostracising China, a very potent disinflationary force is reversed. The result: increased inflationary pressures.
Capital controls are coming. They have a new name: Macro Prudential Regulation. They are yield curve caps. This is also highly inflationary. Counter-intuitively, I see the US$ strengthening. Europe and the Euro are at odds internally. German debt is 200% of GDP, French debt at 400% of GDP. How can that be reconciled? There will (I think) be capital flight out of the Euro into the US$. China wants those capital inflows, but I don't think they will go to the Yuan denominated assets.
Which leaves Gold/Crypto.
jog on
duc