50-50 Odds Core Inflation Hits Three Percent
The core CPI was as expected at +0.2%, but the YoY trend did jump to 2.1% from 1.8% in Feb. There is going to be a price to be paid for last year’s string of wireless-induced 0.1% prints which are falling out of the YoY math. I see 50-50 odds of 3% core inflation by year-end.— David Rosenberg (@EconguyRosie) April 11, 2018
Put the Stag in Inflation
Something has to put the “stag” into stagflation. Your point drives at quandary posed to firms forced to pass along price increases or risk their profits being consumed by higher input costs.— Danielle DiMartino (@DiMartinoBooth) April 11, 2018
Inflation Rising Daily
This is Happening
This is happening. https://t.co/CBRMDoNGhR— Ben Hunt (@EpsilonTheory) April 12, 2018
It's important to see where inflation is picking up: rents are getting pricier, as are healthcare, cell-phone service & car insurance. Arguably these are all non-discretionary expenses, reducing consumer purchasing power unless wages increase more. https://t.co/5kN1fMs7Cs— Lisa Abramowicz (@lisaabramowicz1) April 11, 2018
Epsilon awaits a Match
What the Narrative Machine tells us about inflation. The common knowledge bonfire is all set. Now we’re just waiting on the match. New from ET ... https://t.co/7uGAWeK8AC— Ben Hunt (@EpsilonTheory) April 10, 2018
I’ve color-coded the article nodes by date (bluer = older, redder = more recent) to show this time-lapse effect in a single snapshot of the network. Because this is a “gravity model”, it’s meaningful that the more centrally located articles within the superstructure tend to be redder or more recent articles. Also meaningfully, the clusters themselves show this effect. Look at the blow-up of the network below, and you can see how the more recent (redder) articles in the “markets” cluster are more centrally positioned than the older (bluer) articles in the same cluster. What all this means is that the inflation narrative is becoming not only stronger (more articles, new clusters) but also — and I really can’t emphasize this point enough — the inflation narrative is becoming more coherent and “gravitationally stable” over time. The growing strength and coherence of these Narrative Machine visualizations show the creation of powerful common knowledge around inflation, where everyone knows that everyone knows that inflation is rearing its very ugly head.
What Everyone Knows
For starters, if it is that complex, it's likely too complex.
More importantly, I am quite amused by the irony of the above paragraph, specifically the "powerful common knowledge around inflation, where everyone knows that everyone knows that inflation is rearing its very ugly head."
I propose, what everyone "knows" is useless, most often because it is wrong!
I do not rule out an inflation scare, just as we had in 2008 when crude spiked to $140.
In fact, the above Tweets and articles show it's clear we are in the midst of such a scare right now.
I have a simple question.
When is the last time such overwhelming consensus on a fundamental economic issue ever been right?
One Person Gets It!
I have to repeat this bit of well-stated philosophy.
"#Stagdeflation Defined: The Fed inflates the living sh$t out of assets and investors/speculators delude themselves into thinking that it’s organic inflation."
I do not know, nor care, how high the price of crude gets. But I do know this: Asset bubble and credit bubble busts are not inflationary.
Rear-View Mirror Thinking
Inflation is mostly in the Rear-View Mirror.
Those looking for a huge inflation boost fail to understand credit dynamics.
Austrians who only look at money supply keep expecting pent-up inflation. The Monetarists at the Fed (central banks in general), are clueless about the situation they fueled.
Deflationary Debt Trap Setup
When credit expands there is inflation. When credit contracts (think defaults, bankruptcies, mortgage walk-away events), debt deflation occurs.
Inflation: An increase in money supply and credit, with credit marked to market.
Deflation: A decrease in money supply and credit, with credit marked to market.
You can nitpick with those definitions all you want, but that is how the real world operates.
If banks become capital impaired or defaults rise enough, the banks stop lending. All it takes to kick things off is a significant decline in asset prices.
Perhaps we get consumer inflation for another quarter or two, but inflation is mostly in the rear view mirror, primarily having impacted asset prices, not consumer prices.
Rising interest rates are already starting to impact the housing market. The auto market, home supply markets, and consumer credit in general got a temporary housing boost.
What's next won't be pretty, and almost no one sees it coming. They can't. Inflation is in the rear-view mirror.
What most economists and economic writers expect to happen, already has happened. They don't see it because they do not understand what inflation really is.