If you Google inflation it denies the monetary theory of inflation. Which is another reason you can't trust Google.
If you Google inflation it denies the monetary theory of inflation. Which is another reason you can't trust Google.
Hypothetically, let’s say I am sitting on a million dollars in T-Bills right now.
Where is the best place to invest?
What other currency will be stable? Swiss?
Natural resources?
This collapse will be sudden and big. What are the best option(s)?
Great Tucker Carlson piece address this very issue.
https://www.foxnews.com/media/tucker-carlson-inflation
There is no inflation in a barter economy. Inflation is possible only when the currency issued by the government is based on nothing but the good faith and trust of the government.
The government has control over the currency and prints dollars as it wishes.
Inflation is deliberate and intentional.
.
“Inflation is always and everywhere a monetary phenomenon.”
-Milton Friedman
As long as the government continues to expand the money supply by spending money that does not exist, inflation will continue.
On the off chance that someone here might be interested in a discussion of the Fed’s role in inflation, here are a number of points for consideration:
1. The Fed lost direct control of the money supply when it aggressively expanded excess reserves over a decade ago while simultaneously deciding to pay banks interest on those excess reserves. However, there was no particular catalyst that got money growth going until Covid came along.
2. Before Covid, the imposition of higher risk/capital requirements on individual banks combined with the interest they were being paid on excess reserves kept the excess reserves from circulating, i.e., from entering the money supply used by the public.
3. With Covid came trillions of dollars of direct payments to consumers and businesses. This bypassed the banking system, putting the new dollars directly into the hands of the public. This was the equivalent of Venezuela printing new bolivar notes and using them to pay for its expenses by making direct cash payments to individuals and businesses, an action that precipitated a hyperinflation.
4. As with Venezuela, the U.S. public began driving prices higher using the direct payments from the government. Since the Covid cash was deposited into personal bank accounts, total bank deposits, including M2, increased accordingly.
5. Then, with the banking system flush with cash and willing to lend, the initial price rises started to drive increased bank lending. For example, a house that sold for 20% more than a year ago generated a new mortgage loan 20% higher than it would have been a year ago. Ditto for car loans, personal loans, credit card loans, etc.
6. The result is that the Covid payments were the catalyst to get those excessive bank reserves started into circulation. Once that happened, and prices started rising, the risk is that it continues, with higher prices on everything generating higher lending. Rinse and repeat.
7. Now, with no impinging reserve requirements, hyperinflation of the U.S. dollar has become a distinct possibility. The “transitory” part of inflation might just be a transition from single-digit inflation to double and triple digit inflation, rather than back down to 0-2% again.
8. The Fed’s dilemma, as perceived by nearly all, is that it can’t remove several trillion dollars of unneeded bank reserves over a short period of time without destroying the bond market and it can’t raise interest rates to levels that would get in front of higher inflation. That would require short-term rates in excess of 5% today and possibly much higher. Either move would raise government spending significantly which would increase the deficit even further.
9. But there is a way for the Fed to restore normalcy. It’s just that it has gotten zero consideration. The way to soak up all of the existing reserves in the banking system without requiring the Fed to liquidate its portfolio to a large extent is to change the current reserve requirement from the present 0% to a rate high enough to absorb the entire reserve balance. That would mean setting reserve requirements at somewhere between 40% and 50%. Incidentally, Milton Friedman once advocated a 100% reserve requirement on transaction balances (checking accounts).
10. The result would be to remove the need for the Fed to sell any bonds, while successfully converting all of the present excess reserve balance into required reserves. At that point, the risk of a hyperinflation would be reduced to zero which would remove the need to raise short rates aggressively to get ahead of the present inflation rate, one that risks rising rapidly at present.
That’s it. I don’t see any alternative way out other for the Fed. Tapering certainly isn’t going to do it, nor will modest interest rate increases while inflation is accelerating rapidly.