It's all underpinned by the thesis that inflation is *now* permanent, without ever explaining why for the past twenty-odd years it has been non-existent. That's the bit I just can't get.
There's a few reasons why things have quite possibly changed:
- globalization was a major deflationary force that's going to be replaced by re-shoring and increased nationalism,
- peace is deflationary, and there's a lot less of it now than a decade ago,
- labour force participation is down and it's questionable whether it's going to increase again for a while... short-term and long-term impact of Covid on health, etc.
- wages and sticky inflation is rising, pushes towards unionization, ESG, the costs of implementing technologies to combat climate change (just think of the commodities required).
These are just a few that come to mind. I can see the arguments for and against persistently higher inflation, but I won't hazard a guess as to which side wins out in the end. One thing I notice is that a major argument for team transitory is the demographic trend in the long run. I believe that demographics are largely unpredictable over a longer time horizon, because migration patterns are going to change dramatically due to climate change, war and increasing inequality in the world.
Yes. I can see the merit in all those arguments. But are they not more likely to be longer-run trends? (Spoiler: I'm not sure either...) What bothers me is the insistence that, in the short-run, the kind of mild recession/crash-ette that the Fed is undoubtedly going to create won't suppress the current bout of inflation. That 4-5% note at the podcast end bothers me... Anyway, we shall see soon enough.
Good point. I honestly have no idea how likely each of those scenarios is or whether the short-term effects of QT overpower the long-term effects of some of the things I've mentioned (and if even longer-term demographic trends overpower these in turn). But as you say: we shall see soon enough.
It's all underpinned by the thesis that inflation is *now* permanent, without ever explaining why for the past twenty-odd years it has been non-existent. That's the bit I just can't get.
There's a few reasons why things have quite possibly changed:
- globalization was a major deflationary force that's going to be replaced by re-shoring and increased nationalism,
- peace is deflationary, and there's a lot less of it now than a decade ago,
- labour force participation is down and it's questionable whether it's going to increase again for a while... short-term and long-term impact of Covid on health, etc.
- wages and sticky inflation is rising, pushes towards unionization, ESG, the costs of implementing technologies to combat climate change (just think of the commodities required).
These are just a few that come to mind. I can see the arguments for and against persistently higher inflation, but I won't hazard a guess as to which side wins out in the end. One thing I notice is that a major argument for team transitory is the demographic trend in the long run. I believe that demographics are largely unpredictable over a longer time horizon, because migration patterns are going to change dramatically due to climate change, war and increasing inequality in the world.
Yes. I can see the merit in all those arguments. But are they not more likely to be longer-run trends? (Spoiler: I'm not sure either...) What bothers me is the insistence that, in the short-run, the kind of mild recession/crash-ette that the Fed is undoubtedly going to create won't suppress the current bout of inflation. That 4-5% note at the podcast end bothers me... Anyway, we shall see soon enough.
Good point. I honestly have no idea how likely each of those scenarios is or whether the short-term effects of QT overpower the long-term effects of some of the things I've mentioned (and if even longer-term demographic trends overpower these in turn). But as you say: we shall see soon enough.