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0 pointsfuzz4lyfe6y ago0 comments

A number of factors:

1. Money is essentially free at current interest rates and I don't see a sign of that reversing course.

2. Large firms are hording cash and have more than they know what to do with. They are at the point where they are buying their own stock because that is the most productive thing they can do with that money.

3. The democratic party is running on minimum wage increases. While it is debatable if that will have a huge impact it certainly isn't a deflationary measure.

4. Democrats are also running on the green new deal, universal income and medicare for all that I predict will not actually result in higher taxes for the wealthy in any meaningful way but instead the printing of money in order to fund those programs as that is what seems to happen every time. Even if taxes were implemented as discussed, moving money from investment vehicles (where the wealthy have it) to consumers will still probably cause inflation in terms of housing and consumer goods.

5. China is sitting on about 3 trillion dollars that is currently effectively out of the money supply and they will likely deploy that as a weapon in the trade war.

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mywittyname6y ago

1. Interest rates have been low for a decade now, causing no real inflationary crisis. The localized housing issues are due mostly to income disparities, lack of space for development, foreign investment, and zoning regulations.

2&3. Democrats "running on" some policy does not at all mean it will happen. In the current political climate, it's quite likely their holding a position means it won't happen.

4. Large firms have already been using record low interest rates to finance stock buybacks. This has been going on for years. The last three or four years of stock price growth has been fueled by financed buybacks, with every year breaking the previous year's record. At some point will need to stop.

As an aside, these buybacks are likely going to be the cause of our next stock market calamity.

5. This is sort of legit fear, but 3 trillion dollar is not really enough to make a market-wide impact and selling their bonds would just push interest rates lower, serving to help the US achieve their current monetary policy. They could use this money to selectively certain industries though.

throwaway20486y ago

Its more than housing inflating massively in costs, its education and healthcare too. It may be the only reason that consumer good prices arent inflating is because money is being drained away by the aforementioned 3 major factors faster and faster.

And its not just housing in downtown San Francisco, even housing in middle america podunk nowhere has soared

RhodesianHunter6y ago

All of the things that cannot be outsourced, real estate, healthcare, and education.

rurp6y ago

Why single out the Democrats? The people _currently_ running the government are acting as if money grows on trees; just look at the federal deficit over the past couple years.

fuzz4lyfeOP6y ago

While that is true it is printing money for distributive purposes that I'm more worried about. Spending a few billion on bombs to blow up houses on other continents, or to prop up the stock of oil companies for example won't really move the inflation needle in regards to consumer goods as much as printing it to throw it out of a helicopter would in my estimation.

selectodude6y ago

Right now the vast majority of money printing is being given to banks and then placed right back into the Fed and earning interest for those same banks.

Just look at the M2 monetary velocity[1]. It fell off a cliff in 1997 and never really recovered. It's now at an all-time low. For all intents and purposes we're operating on a light version of MMT.

[1] https://fred.stlouisfed.org/series/M2V

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