I can not stress this enough. I have been following monetary data for a long time. Nothing like this has ever happened before.
The numbers I am seeing are blowing past all previous records by large margins with no signs of letting up. I want to repeat- This is unprecedented. I can not foresee a scenario where this does not lead to massive inflation. The CPI might spike past 5%.
The US bond market (government and corporate) is a gigantic bubble. I have always warned against being a bond bear though. Before becoming courageous enough to short these markets, we need to watch for signs that this 40 year bull market is ending. The amount of US government debt and money & credit growth might be a tipping point to break this market. The price action in the bond markets has not confirmed any of this yet. We should watch it very closely.
It has always been clear to me how this is going to end. The currency market is not going to discipline any of these fools. It will be the bond market that cracks. The federal reserve will do whatever it takes until the bond market begins to break down. At which point, the federal reserve will tell congress to take a hike.
Action Steps
Be prepared for price controls. Price controls prevent the market from clearing. If the government puts a price ceiling on beef, you can expect your local supermarket to have empty shelves of beef.
If you are looking to buy a home do it now. Interest rates are so low for a 30 year mortgage. Inflation will eat away at the debt.
Stay away from bonds.
Stay away from CD’s.
Own real tangible things. Real estate, gold, silver, platinum, etc.
Conditions Required For Snow
I have never issued a price inflation warning before. I understand that the world is a very complex. An increase in money and credit can be offset by an increase in productivity. There is no one to one relationship between money & credit and consumer prices. Hayek articulated this best when criticizing Milton Friedman.
No man can know everything. I certainly do not. While I do not know everything I do know something. I know the conditions for price inflation are here. When dealing with predicting the future about something like this you are dealing with humans. Humans are not like stones. Stones react according to a definite pattern which we can know. We can anticipate what will happen to a stone when treated a certain way. If it was fired from a cannon with velocity “V” at an angle of 45°, I can anticipate where it will land. But men do not all react the same way when treated a certain way. We cannot establish such categories of actions for men.
Imagine I was going to make a prediction about snow fall. Well I know that certain conditions must be true. I know that the atmospheric temperature and ground temperature must be at or below 32°F. I know there must be a minimum amount of moisture in the air. However, just because these conditions are true does not necessarily mean there will be snow fall. If it was a hot day mid July in Florida and I made a prediction about snow fall in an hour, you would think I was nuts. The conditions for snow fall to occur are not true. However, if it was 0°F in New York in January, you might take my warning more serious. You might actually take steps to prepare for snow fall.
The point of this thought experiment is this: The conditions for massive price inflation are here. They are at extremes. I follow all this closely and I have never seen anything like this. You should take steps and prepare for snow fall.