You are making a steady-state prediction in a scenario where the underlying fundamentals are dramatically changing. That's like using the current Oil Futures market as the likely bench for oil prices should large sections of the Middle East go up in nuclear flame.
I'm not making a steady-state prediction; there isn't a distinct relationship between money supply growth and inflation, other than the long-run postulate. Basing your position on the possibility of unforeseen scenarios isn't the most genuine of arguments.
Now less so. (sadly, imo), households have largely ceased deleveraging, setting us up for future pain. However, when you pick up the effects over the last 6 years, you can't toss that out as though it weren't a major factor.
Interest rates across the globe are declining; in emerging market economies such as China, they are experiencing low interest rates, e.g. the 10 year China government bond yield is currently below 3%. According to you three years ago, they were about to go into their version of the
2008 mortgage bubble.
IMO, your predictions are based on your ideology, not positive economic analysis, which is why i continue LMAO when you attempt to bring the future into these discussions.
What is the consumption of retired baby boomers going to look like in real terms when you cut their savings in half? Consumption increasing through inflation is a theory that worked poorly for us in the 70s, as I recall.
Remember, in 1971 the U.S. abandoned the gold standard. Then in 1973, OPEC enacted an embargo against pro-Israeli countries. It wasn't until the manufactured recession of the early 1980's that broke inflation expectations. That's when globalization truly began to thrive; with the world economies so interconnected, it takes some considerable imagination that economic warfare will be engaged on a massive enough level to force inflation expectations higher.
We have a lot of debt to unravel, and we seem to be making very stupid and short-sighted decisions as a nation. Decreased demand for labor is additionally tied to its' increasing costs (which include tax and regulatory), we chose to have fewer kids, and now, apparently, everyone thinks that the brilliant thing to do is to start trade wars with China.
A stupid and short-sighted decision would be to let economies contract to the point where they have nowhere to go but up.
Machines are simply more productive than humans when it comes to completing tasks, which is why automation is so popular among corporations. We choose to have fewer kids because, unlike in previous generations, a well educated individual can earn much more money than they ever have before in history. This relationship
holds across countries and households.
That being said, it remains reality that large deficits are currently baked into our fiscal cake due to the structure of non-discretionary spending. It remains reality that if we choose to try to print our way out of debt, we will increase the cost of borrowing, pushing that goal ever further from our reach. How much of our debt can we pay off by increasing M1 Supply by 15% a year if interest rates go back (as he suggested) to 5-10%? What do we do when the cost of rolling over our debt more than quintuples?
First off all, pushing m2 up by 15% a year does not equate to 5-10% inflation (i don't care what Pete said).
Regardless of nuances, do you understand the mechanics behind inflation and stock debt? The current yield to maturity for all government debt is at historic lows; meaning that for the past 7 years, all debt that has been rolled over and issued is locked into these lows. As inflation and interest rates creep up, existing debt financed at low rates is devalued dramatically.
For example, if we have $20 trillion in debt in year one, and have a YTM (coupon) of 3% and inflation (yield) at 5%, what happens to the value of debt in year 2?
