If you could ask the world’s top central bankers what really terrifies them, I think the honest answer would usually be “deflation.” It is their greatest nightmare. They think a little inflation is good (thus the 2%+ target), and they’re confident they can subdue it if necessary. Deflation is a bigger problem.
Today we’ll consider the arguments for higher inflation in the near future. As you will see, they are serious and convincing. But there are equally serious and convincing points on the deflationary side as well. We’ll get to those next week.
Last week I teased you about the China panel, so that seems like a good place to start. We’ll review that conversation and then bring in some China comments from later sessions.
I've developed this kind of duality. It's hard to think of the next 20 years or indeed the last 20 years without being very optimistic about the future of humanity.
David Bahnsen does a podcast for National Review called Capital Record. We did a two-part series. The following is an edited partial transcript of the first part.
I think we will probably have a few months of significantly higher inflation. It will fade but meanwhile hurt certain people and industries. It will be like one of those extremes causing bruised knees and volatile markets.
Right now, the stock market is in the land-where-there-should-be-sea phase. What we don’t know is when the wave is coming. Maybe there’s time to venture out and see what treasure was hidden beneath the waves... or maybe not. Prudence would suggest that we go searching for treasure on higher ground.
Yes, the housing market is a bit overheated, but for reasons that make far more sense than the rationalizations of stock market bulls. Some buyers are certainly overpaying and may regret it. Nonetheless, I don’t foresee another 2008-style housing crash in the near future, nor anything like the subprime crisis. There are altogether different fundamentals working here.
The last year brought exponential growth in, among other things, use of the word “exponential.” It is now the go-to term when you want to say something is “growing super-fast.”
Big economic storms are rare and usually end quickly, but they tend to have long-lasting effects. Today I want to talk about a storm 50 years ago that still affects us now. Important things happened in the 1970s.
We are going to look at broken debt and broken measurements, and then look at how Fed leaders painted themselves into a corner by shifting to a reactive stance this week.
I believe we have passed the point of no return. Changing policy now would create a recession as big as Paul Volcker’s in the early ‘80s. There is simply no appetite for that. Further, the national debt and continued yearly deficits force monetary policy to stay accommodative.
I don’t think that data means what you think it means. Indeed, much of the data in the way we use it is simply broken.
What normalcy will it be? I don’t expect to simply go back to the way things were. The economy as it was structured in December 2019 is gone forever. The world is different now. The economy will be different, too.
Rather than going deep into one theme, this week we will do a “Random Thoughts” from the Frontline. Today we will cover several topics in shorter form: valuations, infrastructure, the debacle in Texas, and a lot more.
If, however, the pandemic continues into summer, it will mean the Gripping Hand is still squeezing us. Employment won’t recover and more small businesses will fail. This relief package, as large as it is, may prove necessary and maybe even too small.
Today I want to discuss an arcane-sounding but incredibly important term you need to know: Yield Curve Control. Several central banks are already using it and I see a strong possibility the Fed will join them. But first we must again consider the Gripping Hand.
I’m often asked if I foresee inflation or deflation. Both are possible in their own ways, and frankly I feel a little funny telling people I think we will see both. I would just like to have a growing economy and dependable money that holds its value.
The 2020s are going to be about rifle shots, not the shotgun approach of index funds.
Today we’ll begin by looking at new virus developments, some of which are good, some very good, and some frightening. We (the entire world) are in a very tight race with dire consequences if we lose.
This week’s letter is the first part of my 2021 forecast. There is simply too much to cover in one letter, and today we’ll start with the most important factor, a known unknown, that I think will be the driver for 2021.
We’ll take a closer look at the stock market and where it may be going.
The virus—or specifically the political response to it—is causing a mass extinction event for small businesses in certain sectors. At the same time, some large businesses are reaping a bonanza of revenue from the same pandemic.
Two weeks ago I talked about Peter Turchin’s idea of “elite overproduction” leading to social and economic crisis. While he doesn’t have any solutions, Turchin helps illuminate how we reached this point. Today we’ll go a little deeper and think about the implications.
A Happy Thanksgiving weekend to all my US friends. This year was different for many of us—sometimes by choice, sometimes not. But there’s one bit of good news I think we can all share: The holiday season means 2020 is almost over. Soon, we’ll be able to turn the page.
Today I’m going to blend a few thoughts about The Great Reset with some other historical analysis I recently discovered. It adds up to a disturbing outlook, even if (as seems likely, given the latest vaccine news) we’re past the pandemic by late next year. We’ll find different challenges on the other side.
Today we’ll talk about the political changes, what they mean for the economy, and then how the latest vaccine news may affect the outlook.
Today I want to use the election to illustrate just how complex a seemingly simple situation can be. This matters not just politically, but economically as well.
Today I want to look at what will not change. And though I will make a few comments on the election below, I want us to think today about what we can look forward to with an optimistic and realistic vision.
Today I want to discuss why the economy will recover, how that will happen and what it will look like. It won’t look like 2019, but the recovery will have its own flavor as we fast-forward future industries. I think that’s a good thing.vvv
We are in a debt trap. Our political process can’t reduce spending and/or raise taxes enough to balance the budget, so the debt grows and grows. As it does, paying the interest plus the accumulated debt load pulls more capital away from more productive uses. This depresses economic growth, thereby generating even more spending and debt.
Today I want to make some informed speculation about how the next year will unfold. We’re going to reach some key decision points in the coming months and you’ll make better decisions if you think about them before we get there.
I will try to make the case for a much slower recovery thus much higher debt by 2030. Note first, I’m not saying there will be no recovery. I am simply postulating it will look like the slow recovery from the Great Recession, unless the government makes it worse, which is a nontrivial possibility.
I’ve warned for several years now that our growing global debt load is unpayable and we will eventually “reorganize” it in what I call The Great Reset. I believe this event is still coming, likely later in this decade. Recent developments suggest it will be even bigger than I expected. You could even say I’ve been too optimistic.
In this letter I find myself recommending policies that not that long ago would have been extraordinarily distasteful to me. Yet, unless we pursue them, our economy will truly be turned upside down. I fully recognize these things have a cost. But the cost of inaction is much higher.
My theme today is on the pandemic’s future economic impact, especially in the United States.
The unintended consequences from recent Fed “policy” changes, not to mention those initiated in prior decades, have been at the very epicenter of some of the national problems we have. The Fed would vigorously deny this course, but the results are plain for all to see.
We’ll be okay, but we’ll have problems first. Both can be true; the difference is in the timing. It’s important to keep this straight in our minds. Extreme things can happen, for either good or bad, but they don’t last forever. We have to maintain mental balance between the extremes.
This depression/recession is unlike any we have experienced. Parts of our economy are doing well, parts are in recession, and a significant portion is already in a depression. As government guarantees wane in the future, more and more companies and people will slip into the depression category.
Today we will explore what some smart minds are saying about the current economic environment. I'll also aim to help you navigate through its complexity.
As I file this letter Friday morning, people are reacting to the July jobs report. My own reaction: The headline report is absurd.
Big things have been brewing in Europe. The same continent that two years ago I said was going through “monetary drug withdrawal,” is now set to outpace US growth by a wide margin. And US growth, which had led the world for years, now looks likely to lag it.
We’ll start with a dozen or so charts showing the market is either very highly valued, or extremely overvalued, or merely stretched. But in general, you will see markets are indeed at the upper end of historical valuations. Then we’ll consider some reasons why this is so, and why stocks could even go higher.
Politicians love saying small businesses are important to the economy. In this case, it isn’t just rhetoric. The millions of little companies with a handful of workers are, collectively, more important than the few hundred large enterprises we see in the news.
Today we’ll look at the data, including some non-government sources. As you will see, millions of workers will stumble through this period, and they may be the lucky ones.
I read The Black Swan shortly after it came out. The financial crisis and Great Recession were brewing, and I was already beginning to predict a recession. We sensed something big was coming but didn’t know the details. Rereading my September 2007 review of Taleb’s book is an eerie glimpse into the past. It’s also a good reminder that more big events lie ahead.
In short, a demand-driven recession can’t end until demand returns. It doesn’t necessarily need to be the same kind of demand. Indeed, it probably won’t be. But something must restore consumer spending. A lot of entrepreneurs are spending late nights (and days) trying to figure out how to restore consumer spending.
Today I’ll defy the proverb, consider what we know and don’t know, and try to tell you where I think we’re going. In the long run (after The Great Reset in the late 2020s), I still foresee a wonderful new world. But we have to get there first.
In their effort to improve things/prevent pain, Fed officials past and present financialized the economy. That, along with more unintended consequences from government debt and regulatory interventions (all well-intentioned, you understand) brought us to where we are today. We can’t walk it back without a great deal of pain no one wants to take, including your humble analyst.
Today, we’re going to look at some actual data, both medical and economic. Spoiler alert: The unintended consequences of our response may be more threatening than the actual virus, unless we begin changing some things soon.