#CKStrong

Have Central Banks Reached The  Debasement Tipping Point? 

It’s almost impossible to see how the central banks will climb down from the extraordinary heights they have taken their balance sheets over the past 15 years.  The trillions of base money pumped into the global financial system from the central banks coupled with the money and faux wealth created by the private sector, has inflated the global money supply, wealth, liquidity, or however defined, to such extraordinary levels, and with combined with the forces of deglobalization that are fast at work will likely create a future of perpetual shortages in almost all things but fiat money.  

Sorry to drive the final stake into the myth that inflation is transitory or temporary.  No surprise there, however. 

Seriously, folks, how Kafkaesque is it to be talking about 2.0 percent plus 10-year year yields when inflation is heading north of 10 percent on it’s way to 20 percent; or debating what the yield curve is signaling when it is has been managed by the Fed for over a decade?  Strange days indeed.  

What kind of Kool-Aid is everyone drinking?  I want some. 

The Federal Reserve has shredded it’s credibility keeping the monetary spigot turned on for too long and repressing so-called market interest rates, especially given that there was no credit crisis.  My 19-year old daughter is being offered lines of credit greater than Ty Cobb’s top salary. 

Blame It On The Supply Chain?

Nah, maybe in part, we concede, but personal consumption expenditures on durables make up only 13 percent of total personal consumption, although durable consumption skyrocketed during the pandemic, swamping supply chains.  Morevever, the value-added of durable goods to U.S. GDP is only 6 percent of GDP.  

Got that, folks?  The U.S. only produces 6 percent of it’s GDP that hurts if you drop it on your foot.  If, perhaps, you dropped a stale cupcake on your foot it may sting a bit, but it would be classified as a manufactured nondurable good, which make up about 5 percent of GDP.  

Furthermore, can anyone explain the supply chain issues driving skyrocketing rents?  

Too Much Money Chasing Too Few Goods

Too much money chasing too few goods…and wait for it…the velocity of money, again, however defined, will increase with inflation.  And, yet, the Fed talks big but slow walks.