This should dispel the notion.
Can’t wait to hear the Chairman justify zero rate policy and deficit monetization with inflation roaring at > 5 percent. It would be entertaining, if it weren’t so damaging.
Where To Inflation?
Here’s a pretty good theoretical model (follow the entire thread) estimating that U.S. inflation may reach double digits by Q1 2022. One of the premises is that monetary authorities have no way out of this rabbit hole and are constrained by the risk of severely disrupting financial markets in an asset dependent economy.
Recall our view that deflation/inflation is a corner solution and Wall Street’s “Goldilocks” scenario is still just a marketing gimmick. Deflation as markets try to move back to mean valuations – a lot lower – or inflation, and lots of it.
h/t CG
Anyone with a better model, lay it on the table. Stop with the “fake news” or “don’t worry” nonsense. CPI prints > 4 percent in May and you heard it here first.
GMM’s Health Wars
CK and I are battling some serious health issues. Mine, an acute skirmish, which I am now recovering.
CK’s, a three-front protracted war. Her courage to get up and fight everyday has been such an inspiration during my little battle. She also saved my life by forcing me to “ignore my primary doctor’s diagnosis of “all is well” and aggressively pursue my symptoms.” If not for that, the Grim Reaper would have liquidated my position and GMM would be no more. Thanks, CK.
Global Macro Monitor 
Rooting for you guys!
Thank you so much.
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Any thoughts on why bonds and currencies don’t seem to be reflecting rising inflation expectations?
One exposition on their inflation nonchalance: https://alhambrapartners.com/2021/05/16/weekly-market-pulse-bonds-didnt-get-the-inflation-memo/
Would like to hear what Macromon thinks.
Rob, I really don’t know but let me offer this. The bond market and thus interest rates is not a real market anymore as Fed has nationalized anything which attempts to move to a true equilibrium. Why the Fed has own TIPs is beyond me. Interest rates, inflation expectations do not reflect the true picture and are manipulated by Fed intervention.
The dollar? My guess is trading on a growth differential model. There are many models, interest rate differentials, ST & LT PPP, which could drive the dollar at any given time.
Thanks for the reply—your take reflects my instincts as well, I.e. that the bond market cannot reliably be looked to as a provider of information about the ‘real’ economy anymore. I never know what to think about currency valuations, though—always too many variables at work.
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