The FED is doing something interesting. They are actively crashing the stock market (very slowly) as a mechanism of reducing the effects of inflation. By increasing interest rates, they are attempting force the stock market to lose value. That means literally everyone's savings & retirements are going to lose value. They are hoping that this will cause prices to drop without actually doing any deflation of the currency.
What normally would have happened is that people would have been spending money faster and faster in order to replace their cash with assets, and that also means flooding the markets with money as well, because cash is worthless, causing a "Melt-up" rather than "Meltdown" of the economy as hyperinflation begins to kick in.
Instead, Bret Johnson appears to be correct about the "Dollar Milkshake Theory" and the FED seems to be counting on it. In order for foreign countries to pay off their US debt, they need US dollars. Also, in order for them not to lose their entire life's savings in other countries, US bonds look like a better investment because they don't have a negative interest rate.
This actually means that although the US economy is in fucking tatters, and inflation is very bad, the US dollar has strengthened with respect to other currencies because the Fabian Socialist financial order basically built the system to protect itself.
And to a macro-economic bean counter, maybe this doesn't look like a catastrophe because if you manage to strengthen the dollar, it won't matter that inflation is high. But that doesn't change the fact that the real economy, not the currency market, is still in absolute peril. Inflation doesn't just cause price hikes, it also causes all the shortages and over-supply's we are seeing that are also causing price hikes. Everyone printed money, so the inflation can't actually be countered, even if the dollar is getting stronger, because the only way to make the dollar that strong, would be to cause deflation, and pop the everything bubble. The Central Banks know that they can't actually deflate the currency, they explicitly said they couldn't in 2019.
Hyperinflation isn't around the immediate corner (within 6 months), but there's a huge problem at play. Back in 2020, I was concerned it might have been. However, the digital currency's biggest advantage is that it actually can allow for permanent hyper-inflation, by making "helicopter money" absolutely normal for all people at all times. It's where Stimulus Checks and Universal Basic Income are actually pushing us. The government can guarantee votes by literally bribing it's constituents with printed money, and as the money wildly inflates, you just change how you measure the money. Instead of having 100 bucks, you have 10 decabucks. Instead of having 100 decabucks, you have 10 centibucks, so on and so forth.
So, as people still grapple with inflation, they are going to start putting more and more of their money in assets that will have value that appears to be perpetually increasing. "Why should I have $10 in my pocket that will be too worthless to spend money on, when I could buy a 2x4 that will keep increasing in price?" As that happens, monetary velocity will increase (meaning people will be spending thier money like crazy), and that will cause the hyperinflation as more people spend more money, and spend it faster, so that they don't lose any value, making the money more and more worthless. It will be at that point the need for a digital currency will be argued by the Central Banks, who can use a digital currency to mask inflation permanently, in exchange for your immortal soul freedom.
I don't exactly know how all of this is going to play out, but I can't imagine inflation going away any time soon.
Sort of?
The FED is doing something interesting. They are actively crashing the stock market (very slowly) as a mechanism of reducing the effects of inflation. By increasing interest rates, they are attempting force the stock market to lose value. That means literally everyone's savings & retirements are going to lose value. They are hoping that this will cause prices to drop without actually doing any deflation of the currency.
What normally would have happened is that people would have been spending money faster and faster in order to replace their cash with assets, and that also means flooding the markets with money as well, because cash is worthless, causing a "Melt-up" rather than "Meltdown" of the economy as hyperinflation begins to kick in.
Instead, Bret Johnson appears to be correct about the "Dollar Milkshake Theory" and the FED seems to be counting on it. In order for foreign countries to pay off their US debt, they need US dollars. Also, in order for them not to lose their entire life's savings in other countries, US bonds look like a better investment because they don't have a negative interest rate.
This actually means that although the US economy is in fucking tatters, and inflation is very bad, the US dollar has strengthened with respect to other currencies because the Fabian Socialist financial order basically built the system to protect itself.
And to a macro-economic bean counter, maybe this doesn't look like a catastrophe because if you manage to strengthen the dollar, it won't matter that inflation is high. But that doesn't change the fact that the real economy, not the currency market, is still in absolute peril. Inflation doesn't just cause price hikes, it also causes all the shortages and over-supply's we are seeing that are also causing price hikes. Everyone printed money, so the inflation can't actually be countered, even if the dollar is getting stronger, because the only way to make the dollar that strong, would be to cause deflation, and pop the everything bubble. The Central Banks know that they can't actually deflate the currency, they explicitly said they couldn't in 2019.
Hyperinflation isn't around the immediate corner (within 6 months), but there's a huge problem at play. Back in 2020, I was concerned it might have been. However, the digital currency's biggest advantage is that it actually can allow for permanent hyper-inflation, by making "helicopter money" absolutely normal for all people at all times. It's where Stimulus Checks and Universal Basic Income are actually pushing us. The government can guarantee votes by literally bribing it's constituents with printed money, and as the money wildly inflates, you just change how you measure the money. Instead of having 100 bucks, you have 10 decabucks. Instead of having 100 decabucks, you have 10 centibucks, so on and so forth.
So, as people still grapple with inflation, they are going to start putting more and more of their money in assets that will have value that appears to be perpetually increasing. "Why should I have $10 in my pocket that will be too worthless to spend money on, when I could buy a 2x4 that will keep increasing in price?" As that happens, monetary velocity will increase (meaning people will be spending thier money like crazy), and that will cause the hyperinflation as more people spend more money, and spend it faster, so that they don't lose any value, making the money more and more worthless. It will be at that point the need for a digital currency will be argued by the Central Banks, who can use a digital currency to mask inflation permanently, in exchange for your
immortal soulfreedom.I don't exactly know how all of this is going to play out, but I can't imagine inflation going away any time soon.
It's a little scatter brained, but it's hard to explain without going into a ton of detail on each subject.
It's like trying to explain the whole Ukraine-Trump-Clinton-Biden-Russia-Email thing all at once.