Inflation in the Twenty-First Century: A Circular Flow No Longer

Kevin Coldiron is a lecturer in the Masters of Financial Engineering Program at the Haas School of B

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  1. (Figure 2.3 didn’t load for me. Is it local to me?) Thx!

  2. Avatar for jrs jrs says:

    Loads OK for me on Brave.

  3. If I may interject an ET concept into this discussion. “What do we need to be true”.

    The federal fiscal trainwreck happens very quickly at elevated interest rates. My guess is inflation will come down to or below the FEDs 2% target as the BLS will change the formula and/or hedonically adjust the excess inflation away. They will introduce new “incentives” for banks, insurance companies and pensions to force them to become ever expansive buyers of treasuries.

    The Renfields in the financial media will spread the good word , that will put off the reckoning another decade or so.

  4. I can not see the imagine in Safari, but can in Chrome.

  5. Avatar for KCP KCP says:

    Clearly the USA keeps meddling with the laws of balance - moving the fulcrum, reshaping the fulcrum. But ultimately gravity rules here. I keep reading about supply of money from Treasury buyers and the changes in dynamics (one of which Kevin illustrated in this thread).

    I guess my simple question: Is there enough supply in the world of money to sustain an ever increasing share (40% and rising) of the world’s deficits (USA) for a mere 4% (USA) of the world’s population? Doesn’t gravity come in at some point and reset things to a proper balance?

    If the world has other alternatives, clearly rates in USA have to move up or stay higher, but who are the other buyers? Jack/Jill taxpayer, USA institutions, the FED? Doesn’t that supply shift start starving the private sector?

    These scenarios certainly seem to have higher odds of playing out given the geopolitical shifting going on, at least that’s my read?


  6. Avatar for 010101 010101 says:

    That would be the playbook, it could be running out of pages. The commercial banks seeking to hold more short term treasuries will reduce the supply of credit to business; counterproductive if production and exports are hoped to reduce deficits.

  7. I think the more useful comparison is debt and deficits as it compares to our GDP vs that of the world population. Your point still holds just not as striking.

    1960 $1.37T $0.53T 40%
    1965 $1.97T $0.74T 38%
    1970 $2.96T $1.07T 36%
    1975 $5.92T $1.69T 28%
    1980 $11.23T $2.86T 25%
    1985 $12.79T $4.34T 34%
    1990 $22.63T $5.96T 26%
    1995 $30.89T $7.64T 25%
    2000 $33.62T $10.25T 30%
    2005 $47.53T $13.04T 28%
    2010 $66.13T $14.99T 23%
    2015 $75.22T $18.23T 24%
    2019 $87.80T $21.43T 24%

    Of course Govt borrowing crowds out the private sector. I just dont think our leaders look at world nearly the same as we do. I think they know it’s a house of cards They just ask themselves " How can we put off the collapse until WE are out of power. For current Democratic leadership. Biden , Pelosi, and Schumer that’s not very long. For GOP Trump , McConnel and McCarthy its not very long either —so maybe the bill will be paid sooner than expected.

  8. Avatar for KCP KCP says:

    Yes the GDP filter is very helpful (and indicator is better than i thought).

    Odd enough, i just saw a post in a Mauldin publication where Kevin’s plumbing drawing is playing out with the saudi’s…their treasury holdings have fallen from $184B to 108B in…3 years. My hunch is that USD from USA is still flowing at a decent rate to Saudi for oil, especially in the last 3 years.


  9. OK thanks all! Image loaded in Chrome but not in Safari. (I wonder how much other stuff I missed over the years?) Thx!

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