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I don't subscribe but for some reason the link worked for me.....The economists Milton Friedman and Anna Jacobson Schwartz demonstrated in “A Monetary History of the United States” that a collapse in the quantity of money was the main cause of the Great Depression. Hoping to avoid a repeat, the Federal Reserve in recent weeks has poured money into the economy at the fastest rate in the past 200 years. Unfortunately, this overreaction could turn out just as poorly; history suggests the U.S. will soon see an inflation boom.
Excluding the years immediately after the Revolutionary War, the past few weeks have seen by far the highest rate of monetary expansion in U.S. history. The Fed might defend itself by saying that its “shock and awe” tactics have given financial markets confidence that the coronavirus won’t cause a long and deep recession. And its massive bond purchases—more than $500 billion between March 11 and April 1—surely won’t continue at the same rate for the rest of the year.
It’s reasonable to assume that by spring 2021 the quantity of money will have increased by 15% and possibly by as much as 20%. That wouldn’t quite match the peak rates of expansion seen during and immediately after the two world wars of the 20th century, but it could surpass peacetime records, outpacing the previous peaks in the inflationary 1970s.
As in wartime, federal expenditures are rising sharply while tax revenues are being hit by the lockdown. Both World War I and World War II—and, indeed, the Vietnam War—were followed by nasty bouts of inflation.
Mr. Congdon CBE is chairman of the Institute of International Monetary Research at the University of Buckingham, England.
© 2015 Mutual Fund Observer. All rights reserved.
© 2015 Mutual Fund Observer. All rights reserved. Powered by Vanilla
Comments
I'm looking for the silver lining here
@Crash
You noted: You don't have to invest in a high yield bond fund for your mission.
Keep in mind with what I write, that I am a total return investor. Be it equity, bonds or a combination. Total return, is what really matters to compound one's money over time.
You are desiring to chase higher yield to have a decent income stream; I look towards chasing bond yield when it is headed down, which equals "price performance and profit" for the total return view.
Depends on how one views income stream and from where it arrives, yes?
You view that income stream comes from a monthly distribution of "yield"; likely from a bond fund investment.
I view income stream (when needed) to arrive from which ever fund holding I choose.
I'll use FBALX as an example, and presume all of the money we have actively invested, is in this fund. So, at this date; one has about a 70% equity and 30% bond portfolio. Perhaps a bit hot to the equity side, but any other balanced fund may be substituted, as with VWINX. The main point being, that long term performance of either fund is decent.
FBALX doesn't have a monthly distribution, only quarterly for the bond portion and semi annual for cap. gains; and the yield is only 1.7%. These don't matter; as the focus is long term total performance of the asset.
If one wants or needs a monthly distribution from this fund; the desired amount of FBALX is sold, which automatically moves to the Fidelity MM account and then transferred to the existing, linked credit union account. Magi-co within a few days time.
Well, just another view of the process of not really needing a bond fund that provides a monthly distribution to obtain the monthly cash flow result.
NOTE: I recall your monthly monies are coming from within an IRA, if so; you're already meeting part of the annual RMD.
My 2 cents worth.
Catch
....Still re-investing everything, otherwise. I've got 7 years until age 72 and RMDs. I do have my eye on Total Return, and I'm happy with my portfolio. I pine for the days of 5% CDs. Simple, easy, insured, rather foolproof...... That one, single big chunk was taken from PRWCX. Feels big to ME, but it was just $4,000.00. We're in no tax danger. I'm holding up well, since the market's swoon. I'm into single digits tonight, in terms of the "loss" from the all-time highs back in Feb.
Thanks for thinking of me. DAMN this keyboard. I have to type everything twice.
To whom are you asking the question about VWINX?
I used this fund in an example, but I don't find any other mention.
Bee is spot on, in the near term the issue is Deflation due to no demand for much of anything. Down the road, post vaccine, we might see inflation. So much of the problem with inflation is the gov't and how they report the statistics. The numbers are so massaged that it really doesn't reflect reality on the street. Right now, we're experiencing about 10% but the accounting tricks they use these days (e.g. which housing stat - own or rent?; hedonic adjustments, etc.). At shadow stats, the government has us at about 1-2% while John has us at 8-9%.
Frankly, the situation is so fluid and undetermined that WTF knows?
and so it goes,
peace, and flatten the curve,
rono
http://www.shadowstats.com/alternate_data/inflation-charts
https://seekingalpha.com/article/4340323-inflation-vs-deflation-tug-of-war and, Difference Between Monetary Base and Money Supply: High Level of Unproductive Debt: Unemployment Factors: On Assets to Hold: