Long-time readers know how fond I am of metaphors and analogs. I have one to offer today, and it has to do with permafrost.
According to the articles I’ve read, there is far more carbon stored in the permafrost of Earth than already is in the atmosphere. In other words, if the permafrost begins to melt, a staggering amount of carbon gets released in the atmosphere, which itself speeds up the process of global warming. (Kindly note the politics-free atmosphere of Slope persists, and this is a metaphor, not the opening salvo of a discussion on climate change).
Thus, that trillions of tons of carbon exist, but they are safely stowed away in the permafrost…………….unless it melts.
I think it’s exactly the same way with inflation. Exactly the same. Because the Fed isn’t hiding the fact it has released trillions and trillions of dollars of new “money” into the economic system……….
………..and yet the inflation index not only isn’t budging, but it has been withering away from years.
So where’s the inflation? Why isn’t the general public facing a yearly inflation rate of 15%? You already know the answer. Assets. They are the metaphorical permafrost housing all those trillions. There’s inflation, all right. Tons of it. In places like Bitcoin……..
………and, of course, the grotesquely hyper-inflated equity markets:
So what happens when………….
- For whatever reason, crypto owners start selling their coins for dollars;
- Stock holders start selling the shares for dollars;
- Dying parents start leaving their millions to their children via inheritance
My view is that all those dollars – – trillions of them – – are going to go into the real economy, inflation will start to take hold, and rising prices will simply spur on the buying (“might as well get it now before it gets even more expensive.”)
And that melting metaphorical permafrost – – and the trillions of dollars that are released – – is going to cause an inflation that the Fed will never, ever wish it had solicited.
