INFLATION EXPERT SEES “MUCH MORE” HEADED OUR WAY!
“It’s as clear as the nose on your face!”
That’s what Steve Hanke says about the inflation headed out way. Hanke is a leading inflation expert, an economics professor at the Johns Hopkins University and the director of the Troubled Currencies Project at the Cato Institute.
“The dramatic growth in the U.S. money supply, when broadly measured, that began in March 2020 will do what increases in the money supply always do,” says Hanke.
Hanke uses a monetarist model to estimate the lag between monetary creation and it’s appearance at the level of consumer prices. “Money growth will lead in the first instance (1–9 months) to asset-price inflation. Then, a second stage will set in. Over a 6–18-month period after a monetary injection occurs, economic activity will pick up. Ultimately, the prices of goods and services will increase.”
“In response to the COVID-19 pandemic in March 2020, the growth rate in M4 [a measure of notes and coins in circulation plus bank accounts] began to skyrocket. By the end of 2020, it was growing at 28.9 percent per year, the highest year-end rate since 1943…. it should be obvious, even to the untrained eye, that the recent March year-over-year CPI inflation rate of 2.6 percent is simply a harbinger of what is coming in the future: more inflation.”
THE FRUITS OF INFLATION: FROM ERNEST HEMINGWAY
Almost a hundred years ago, during the ruinous German inflation, Ernest Hemingway and his wife Hadley left Paris for a hiking and fishing tour in Germany’s Black Forest. The summer trip was made affordable because at that point the exchange rate for the German mark was 605 to the dollar, down from 320 in the first half of the year. By 1923 it would be much, much worse.
Years later Hemingway called upon the details of this 1922 trip for a passage in his famous story The Snows of Kilamanjaro:
There were birches along the stream and it was not big, but narrow, clear, and fast with pools where it had cut under the roots of the birches. At the Hotel in Triberg the proprietor had a very fine season. It was very pleasant and we were all great friends.
The next year came the inflation and the money he had made the year before was not enough to buy supplies to open the hotel and he hanged himself.
MISH ON GOLD: “THIS IS ONE OF THOSE TIMES!”
Michael Shedlock, “Mish,” is one our favorite market commentators. Here is a note from MishTalk.com just days ago:
“Long time readers know that I have never issued a sell recommendation on gold….
“I have been [holding] gold since it was $300 or so. Occasionally I trade some for silver or even equities and have written about gold-to-silver swaps a couple of times.
“Although I have not said ‘sell’, on some occasions I do step up to the plate and suggest ‘now is a good time to buy gold’.
“This is one of those times.”