Posted on 08/13/2021 4:25:18 PM PDT by MtnClimber
Financial markets believe in Goldilocks. Having become more concerned about inflationary pressures over the first five months of the year, their current consensus is that price rises in the US and other advanced economies will be neither too hot nor too cold in the years ahead.
The gap in yields between nominal US government bonds and inflation-protected bonds has settled at a little over 2 per cent for the next 10 years. As Goldilocks would say, that is “just right”, allowing a high-pressure economy to maintain robust jobs growth and a gradual normalisation of monetary policy.
But reality is messier than fairy tales. In the second quarter, prices rose at rates not seen in decades. In the US, the annualised rate of core inflation rose to 8.1 per cent, its highest level in any quarter since 1982. Across the OECD advanced countries, the inflation rate in the quarter rose to a level not seen since 1995 and even in inflation-obsessed Germany, annualised inflation increased at its fastest pace since the early 1990s post-unification boom.
Central bankers insist that there is little to worry about. Higher inflation is “transitory”, they say, adding that monetary stimulus is still required to enable a strong recovery from the coronavirus crisis. They see the risks of tightening policy too early, leaving economies too cold, as worse than those of leaving things a bit late.
(Excerpt) Read more at ft.com ...
During times of inflation the best performing investments have been commodities, especially oil or energy related stocks. During periods of hyperinflation the best performing investment is gold.
I am curious about what others are thinking.
Translation, we haven't a clue as to what the actual outcome will be.
“...neither too hot nor too cold...”
What does Goldilocks say?
Lead is always a good investment.
Inflation is caused by expansion of the money supply. All this confusion added on top of that is deliberate. The money supply has been increasing at 38% yearly until the last two months where it has been slowed down to 15%. Since it can take up to 2 years before the market catch’s up we are in for inflation worse than Carter’s for at least a year.
You are right.
Actually most stocks tend to rise along with inflation.
The worst performing are cash, fixed pensions, fixed annuities and saving accounts.
Most retirees are going to be shafted.
Higher inflation is “transitory”,
So, yes, there is a transitory element as the supply chain adjusts, and another when the unemployment bonuses get cut off, but that is not all that is going on.
My remark was really meant to be taken that they don’t know how bad it actually will be, so they are kind of downplaying it as much as possible right now. When in reality they they indeed do know it will get hot. They said that to try and encourage more people to regain confidence with their consumer spending. They don’t care how many people who take their statement as encouragement, and the position it will put them in if they carelessly spend more than is necessary right now.
Gold is not moving much.
My view. Gold isn’t so much a hedge against inflation. You expect inflation, buy stocks. Companies can increase their prices to adjust. In this case we are still talking about return. Gold is really more of a SHTF investment. Armies are advancing... sell your assets, buy gold, get out of Dodge. Doomsday. Do you need a hedge against Doomsday? You have to decide that for yourself. It never hurts to hedge against everything.
IOW, keep those trillions flowing into the financial system to keep our bonuses rolling in.
Agreed. Actually, silver as well. Both markets are manipulated*, Gold by the central banks and silver by the speculators. The big "secret" there is naked shorting.
When Nixon "temporarily" (as in "transitory") removed gold backing from the dollar, a paper gold market was set up. One of the comments then was that a volatile gold market would discourage the public from investing or saving that metal. IMO, at that time, it was just an observation on human psychology. Today, again IMO, volatility has become a tactic the central banks use to maintain the illusion that the dollar is sound.
Putting a percentage in gold and silver is buying financial fire insurance, hoping never to have to use it. Investing in it is for those with cast-iron testicles for the above and below reasons.
The $100 smash down last week** was done (IMO) to clear out some of the short positions the banks had taken in supporting the dollar. With Basel III coming into full effect in Jan. 2022, expect more hair-raising drops as the banks do a golden CYA and wipe out their remaining short positions.
Fasten your seat belts, whether you agree or not. As someone in the Carter years opined "The ship of state is adrift in a sea of fiat currency and is using the rudder as a paddle".
*In the end, manipulation only succeeds if it follows the trend. Trying to suppress it only results in an explosive reaction in the opposite direction.
**What rational group of investors would dump FOUR BILLION dollars on a market that was in weekend mode? This was a bold, in-your-face move by the central banks.
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