Scott Minerd: “We are a long way from 1970s-style inflation”

“We are a long way from 1970s-style inflation,” Scott Minerd said. The data does not support the view that inflation is non-transitory, he said, despite what some people, including hedge fund manager Paul Tudor Jones, are claiming,

Scott Minerd is the chairman of investments and global CIO of Guggenheim Investments. He spoke to investors via a webinar, titled Macro Outlook, on June 17.

Minerd spoke a day after the Fed met and was critical of its statements. He said, tongue in cheek, the Fed has clear objectives that it “makes up as it goes along.” He called the Fed’s meeting one of the “finest events of obfuscation” he has seen.

Inflation is coming from used cars, hotels, and air fare, he said, and those prices will approach a “terminal value.”

We are seeing a reversal already in materials such as lumber. The means of production, like the sawmills that produce lumber, will become more efficient, increasing supply and reducing prices.

“This is Adam Smith’s invisible hand at work,” Minerd said, “increasing supply to bring prices back to equilibrium.”

But what about the huge growth in money supply?

Minerd was trained as a monetarist at the University of Chicago. He cited money supply growth and inflation spikes following the last two world wars that proved to be non-transitory. Inflation followed World War I, he said, and was abated by economic growth. Following World War II, money printing accelerated and there were price controls and financial repression, which stayed in place until 1951. There was high inflation, he said, but not skyrocketing yields, and that inflation was short-lived.