Thoughts on inflation ...

"Inflation" is the trending topic these days . Who knew how much 1 year can change the perspective . From recession to inflation in 1 year. I am not going into reasons behind the inflation or who to blame ? On twitter - FED and its easy money policies are the responsible one ( which I strongly disagree , although I do believe the "outcome based approach" rather than "expectation  based" is somewhat responsible , at least for the controlling inflation part ) but would go into - how I am tracking it . 

This time is mainly the "supply side" inflation - Labor , commodities , semiconductors  and the list goes on. I  believe the troubling piece is the "wage increase" because of the labor shortage. This can lead to price hike > wage increase spiral , relatively fast. And I do believe, in the end - next 5 years ( being very optimistic here)  , this will ultimately lead into bear market. Since full effect of demand side inflation is yet to come.

In short, Covid  crises created supply bottlenecks last year, which was not noticeable because demand was missing. Congress & FED took unprecedented steps to bring back the demand. As a result , we have low supply and somewhat appropriate demand so output imbalances > higher prices and so on ....  


 

   

  

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