Will President Biden’s economic stimulus cause inflation? Economists are unsure Note the language in the original story that the survey of economists was done by "the Initiative on Global Markets Forum (the University of Chicago Booth School of Business." These are Harvard, Yale, Princeton, and Stanford economists surveyed by a business school--not exactly bastions of radical leftwing ideology. Dalio has a particular world view, which slants towards Ayn Rand, yet even he recently acknowledged something has to be done about inequality. But his economic predictions have been wrong in the past, in fact quite recently:
https://bloombergquint.com/business/for-bridgewater-a-year-of-losses-withdrawals-and-uneasy-staff And hedge fund/money managers in general have had a particular anti-Keynesian libertarian slant that has proven them wrong many times:
https://theatlantic.com/business/archive/2013/05/if-hedge-funders-are-so-smart-why-are-they-so-relentlessly-wrong/275700/ The thing is educated people disagree on this subject of inflation, but one thing the stats show is that the notion that there is a one-to-one correlation between the money supply and fiscal spending with inflation is a political fallacy. The causes are complex. I've posted this before but it's worth reposting:
https://gmo.com/americas/research-library/part-1-inflation--tall-tales-and-true-causes/Moreover, I would add, as you mentioned, that depending on one's perspective inflation isn't all bad, depending on the kind, size and duration of inflation. A lot of money managers dread wage inflation, and it may be the source of real broader inflation. But I think wages for average Americans have stagnated for decades on a real inflation-adjusted basis and have actually declined since the
1970s for the lowest paid workers. Some wage inflation even if it filtered into the rest of the CPI would be a good thing for many people. A higher minimum wage is absolutely in order.
But the thing I would stress is that no one really knows whether the current economic policies will bring about a period of extended high inflation, and the fearmongering from the rightwing has less to do with economic reality than concerns about having to pay workers more and their taxes potentially going up. The truest response in perhaps the most unsettling one: We just don't know. In fact, inflation from my perspective may be more influenced by Covid-inspired global supply shortages than monetary or fiscal policy.
Interestingly, from a leftwing MMT perspective you can hear some very different viewpoints from the prevailing ones in the original survey in this interview with Stephanie Kelton who wrote
The Deficit Myth:
https://dissentmagazine.org/online_articles/monetary-mythbusting-an-interview-with-stephanie-kelton
FSRRX My apologize, but are you trying to create a catastrophe or avoid one with FSRRX?
Here are FSRRX stats (source Portfolio Visualizer):
FSRRX has had no clear advantage over a conservatively allocated fund similar to VWINX.
It's almost 32% draw down in July of 2008 took over 2 years to dig out of. It Real return (after inflation) is barely 2% over the last
15 years. I believe Fidelity offers MM Mutual funds that might achieve this.
As a hedge against bad outcomes what about PRPFX..not perfect but better at dealing with equity market catastrophes.
FSRRX @ron : This isn't a bond fund 23% stock 52% bond
17-
19 % (?) other. Max draw-down
14%.
Derf
Will President Biden’s economic stimulus cause inflation? Economists are unsure @LewisBrahamYour last entry reminds me of Ray Dalio's presentation on "How the Economic Machine Works". I recall one quote form his presentation that goes something like:
"One man's debt (liability) is another man's income (asset)"Debt creates what he describes as the long and short term debt cycles. Individuals need to service (repay) there debt (Principal & interest) to the borrower (usually the bank). An arrangement exists whereby the government injects liquidity into the system at a very low interest rate (overnight bank rate). The bank in turns loans this liquidity (money) to individuals and corporations so that they can receive and offer goods and services.
The money loaned to individuals and corporations needs to be repaid to the bank (both principal and interest). The money borrowed by the bank is only repaid to the government to the extent that it is borrowed and the banks only outlay is the overnight rate of interest. The government repo's (soaks up) any liquidity (borrowed money) that was not used by the bank to extend credit to credit worthy borrowers.
If credit worthy borrowers add value (labor, innovation, good & services, demand for financial assets) they are able to both pay back the bank and grow the economy. It all works.
When borrowers default, the systems grinds to a halt.
I'm sure you understand all of this, but too many (myself included) Ray Dalio does a great job explaining it all (see video below).
Getting back to inflation. It seems a strong economy should both inflate (have elements good inflation) and deflate (have elements good deflation) simultaneously (would be nice).
IMHO, Biden's bill should be looked at through that lens.
When is Inflation good?
how-can-inflation-be-good-economywhy-is-inflation-goodWhen is Deflation good?
can-deflation-be-goodRay Dalio's Presentation:
The 90/10 Rule - Pre and Post Retirement Thinking In preparation for retirement, most people spend 90% of their planning time on the financial issues and 10% on the non-financial issues. After retirement, the ratio reverses, and most retirees spend the vast majority of their time focusing on the non-financial issues of life
Seems like a article worth sharing. Lots of links to other topics for both young (Pre-retirees) and Old (In-retirees).
introducing-the-90-10-rule-of-retirement
Selling or buying the dip ?!
Is the Stock Market Open at 3 AM? This Startup Says It Should Be “A startup trading platform is seeking approval from the Securities and Exchange Commission to launch the first U.S. stock exchange that would operate around the clock, including on weekends and holidays. The startup, 24 Exchange, said it filed key parts of its application for a national stock-exchange license with the SEC on Monday, including a rulebook and user manual detailing its proposed approach to trading hours.
“Under decades-old conventions, the bulk of stock trading takes place between 9:30 a.m. and 4 p.m. ET on weekdays, and exchanges shut down for holidays, such as Good Friday and Washington’s Birthday. In contrast, 24 Exchange would operate like the foreign-exchange and cryptocurrency markets, which run continuously.” Excerpt from
The Wall Street Journal October 6, 202
1SourceSome observations::
- Later it’s stated that individual investors want the freedom to trade round the clock.
- Under the proposal, trading in fractional shares would be permitted.
- Big time traders / Wall Street professionals aren’t happy with this, as they relish time off for pleasure and relaxation, and apparently would feel a need to stay tuned in to markets 24 / 7 if this passes.
- Personally, I do some of my best thinking at 3 AM - so I support the idea. :)
