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In this video, I explain what everyone might be missing about inflation.
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References:
RESOURCES
General Country Data
‘How Transitory is Inflation?” Research Affiliates
Path to Pivot
BOE Data
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Inflation is a hot topic in the world of economics, and it seems like everyone is talking about it. With prices rising and the cost of living increasing, it’s no wonder that people are concerned about the impact of inflation on their wallets. But what if I told you that there is something that everyone is missing when it comes to understanding inflation?
One common misconception about inflation is that it is solely caused by an increase in the money supply. While an increase in the money supply can certainly contribute to inflation, it is not the only factor at play. Inflation can also be caused by an increase in demand for goods and services, as well as a decrease in the supply of those goods and services. Additionally, factors such as changes in production costs, international trade, and government policies can all affect the rate of inflation.
Another thing that people often overlook when it comes to inflation is the impact it has on different groups within society. While it’s easy to focus on the overall inflation rate, it’s important to consider how inflation affects different demographics. For example, elderly individuals on fixed incomes may be hit harder by inflation than younger, working-age individuals. Similarly, low-income households may struggle more with rising food and housing costs than higher-income households. Understanding the unequal impact of inflation on different groups can help policymakers and individuals make more informed decisions about how to mitigate its effects.
Furthermore, many people fail to consider the long-term consequences of inflation. Inflation erodes the purchasing power of money, meaning that the same amount of money will buy fewer goods and services over time. This can lead to a decrease in living standards and savings, as well as create uncertainty about future economic conditions. In extreme cases, hyperinflation can lead to economic instability and social unrest. It’s crucial for individuals and policymakers to consider the long-term implications of inflation and take proactive measures to address it.
In conclusion, while it’s easy to focus on the immediate effects of inflation, it’s important to consider the underlying causes, the unequal impact on different groups, and the long-term consequences. By taking a more holistic approach to understanding inflation, we can better address its effects and work towards creating a more stable and prosperous economy for everyone.
I am a BTL investor and Inflation is my friend I cant see inflation at BOE target for years but i know by debt will feel smaller due to inflation and i know my rents will go up For my investments in Pension and ISA and am not so optimistic But my future is to save more money for deposits and by more bricks via a Company anyone one relying on the world stockmarkets are going to suffer from inflation i invest i tracker and the avaage return is 7% ish over 5 years if infkation is at 4% its not a great return i see MY SIPP as an IHT account but i am glad i will not have to rely on it into old age high yeilding property is my plan
As with interest, inflation is compounding. 10 years of 5% (which may sound tolerable short term) means prices have gone up 62% during the 10 years, and (worse) what you can buy with your pension or other savings, has gone down with same amount.
High inflation historically has been in the tail-end of periods with excessive spending (cheap money), which is NOT what we have had this time. We have had cheap CREDIT, not cheap money, why we as a
society (including government) now owe a ton on money EACH. Even local councils have been borrowing like mad off the PWLB (Public Works Loan Boars) in the believe that local councillors all the sudden were financial wizards, and could convert cheap money to loads of income in their boroughs. Woking (120k residents) being a great example having borrowed £1.9bn on property projects already written down in value to tune of 80%, but the debt will take them about 100 years to clear. At least 30 councils like Woking is heading for section 114 (bankruptcy) with only options of collapsing or government bailout. Businesses have done the same. Rather than use 10 years of cheap credit to pay off older expensive credit, we (again) borrowed up as much as we could, for new shite we mostly did not need. Bigger houses, bigger cars, solar farms in Thurrock council, unused hotels and shopping centres in Woking. So this time round, opposed to the 2008 crash, the government cannot throw in the needed money to avert the disaster as they have no savings. Their only handle for the next decade is rampant QE (quantitative easing) which is printing new money like never before. And if anything fuels inflation, QE does. I can easily see a looming British hyper inflation, completely eroding the value of all assets in the U.K. economy.
Which large country (oddly) still has a very healthy economy, low inflation, preparing for a big shopping spree in all the crashing Western economies ?? Yes, Russia is monetary tip top shape. Whilst poking holes in coffers all over Europe with things like funding Brexit, luring the West to pour money into Ukraine and next Moldavia, they are just getting ready to kill us off financially….. Enjoy…
This info only works if you think that 'inflation' is the rising cost of stuff – incorrect.
For 250 years everyone has been brainwashed by economic 'theory' and axioms from all the adversarial schools of economic thought .
The only empirical study out there suggests that 'high interest rates FOLLOW high growth and low interest rates FOLLOW low growth' so the notion of 'lowering interest rates to stimulate the economy' is, as mentioned, a proclamation or assumption – an axiom in it's purist form.
Becoming a good trade takes time and patience. When i first got into trading i was liquidated twice, and lost my entire mortgage deposit. I could have given up, but decided to learn how to trade and put it into practice. 4 years later and i am glad i made that decision.
Absolutely, another HUGE thing that many will miss is when the politicians take credit for 2% inflation will be after 2 years of high inflation. Inflation being a yr/yr statistic then most of us have been left to far behind.
Link to source data please
Great content, fantastic anything thank you ever so much for sharing
A retraction of globalization could mean some inflation for the next 10 years.
Fantastic video and content. I totally agree with your analysis. Inflation above 4-5 % is here for at least 4-5 years in the Uk. This will have massive implications for asset values such as stocks and shares and house prices which are well over due a correction. Artificial intelligence may play a role in reducing inflation in the next few years but we’re still along way off this intervention.
Powell, the FED and the BofE (if they were doing there job) should've seen this coming many years ago and started to raise interest rates a lot sooner over a longer period which probably wouldn't have required the knee jerk (interest rate rise) reaction that we have seen over the last 9 months. They could've nipped it in the bud early. To busy printing money I guess…?
The difference in the US is that CPI inflation is coming down way faster than here in the UK but Powell amongst others at the FED seem to be hellbent on increasing rates further rather than letting foot of the gas a little and holding rates where they are for a while.
A very interesting video.
My view on the overall prospects for the economy are actually somewhat contradictory.
On the one hand, the overall economic picture is actually reasonably good. Sorry to say that to the perpetual naysayers. So most companies will do OK.
However, on inflation as an isolated matter, I have been thinking it will be stickier for longer than lots of people have been hoping. One of the prime reasons for this is lack of understanding amongst politicians of quantitative easing as a major cause of inflation. Until they get to grips with that, they will continue to downgrade my pension, which can only rise by a maximum of 5%. But perhaps that is a good thing to them.
the FED is currently loosening money supply and are handing out billions to the US banks as they're collapsing!!!!
Unfortunately I think that inflation will remain high for the next decade or more. I have been a bit of a gold bug for a while . I quite like rental housing as an inflation hedge. I think we have a difficult decade to come.
The Youtube algorithm always puts your new videos at the top of my most recommended. Another amazing video, full of well researched data and facts. I keep pausing on your charts to absorb the information and rewinding back to key points you make.
I know your videos take weeks of prep to research and produce, I wouldn't mind more shorter bite sized videos that were quicker and more frequently rolled out, especially as reactions to very new financial news.
You deserve so many more followers than you currently have.
A superb vlog. Thanks.
But, please stop the clickbait titles.
It's a windup and who needs winding up?
Yes, you touched on the nub of it right at the end, for me. I think inflation will come down to a degree, oil and gas prices are down, but food and housing are still a problem. And, those are the three main inflationary forces. Wage increases are not a problem as consumption continues to be flat. (See IMF report).
From what I have read Goldman Sachs etc, the global markets have changed. Global trade and supply chains are going to be difficult for some time and add to that the Chinese sickening Dragon.
I'm just a punter, perhaps you could cover some of these topics?
Meanwhile I watch my investments wither on the vine despite my best precautions.
Another good video,but I wish to go off on a tangent. Pre covid from 1993 to 2015 i often holidayed in Turkey. I'm sure you are aware of the econimic woes of Turkey over the years and pressure on the Lira. But this is fact over those 20+ years,(wait for it) the rate of currency DEPRECIATION was higher than rate of INFLATION,meaning the £ went further and in pounds sterling I was spending less on a daily basis on food and drink as the years went by. Ahead of my trip to Turkey next week, i've done some research and the same applies re food and drink. Accomodation has more than doubled and we all know about long haul(I'm flying from Bangkok).hope you find this of interest.