Originally Posted by
KirillTheThrill
If money supply increases faster than real output, it will cause inflation. In other words, If there is more money chasing the same amount of goods, firms will just increase prices.
Does that sound familiar right now?
Hyperinflation is a totally different topic. Price of a good increases 50%+ in a day will never be the result of the feds printing too much paper.
If we have a shortage of goods, resulting in consumer panic (mom buys 15 gallons of milk on single grocery run due to fear of supply shortage) that could create a hyperinflation event. We are currently having supply issues, and it’s getting worse, that’s what I’m more fearful of.
Thankfully, the last time we had morons hoarding toilet paper in fear, a shortage in supply wasn’t actually an issue.
What I am saying is the extra money is NOT chasing more goods. If the money is either put in savings or used to pay down debt, you do not have the situation you are saying. This is velocity of money slowing.
Spending of that extra money is NOT occurring. People have been socking it away, based on reports from the Fed.
Short term inflation will occur when the supply of goods has reduced compared to two years ago. (Such as the shortage of chips.) Chip manufacturing capacity did not reduce. When the supply chain gets back in gear and suppliers resume manufacturing at previous levels, this short term price increase will ease. They will come back down. We are seeing this with lumber prices, right now. Supply prices of lumber for housing is starting to ease.
Now, the Fed can screw this up by jacking up the overnight interest rates, inverting the yield curve, throwing the country into a recession. The government can screw this up by massive spending, which indeed is inflationary. Those two not withstanding, what I said above should occur.
I am not saying this. My large, successful investment management firm, with lots of sound research, is saying this. They have a track record that is better at predicting what is going to happen than the talking heads you see.