Monday, May 10, 2021

SPX and Inflation Update

Since last update, the market has at least removed one near-term option from the table, leaving only "bullish now" and "bullish a little later" as the options:

In other news, inflation is picking up a pretty solid head of steam, which will be interesting, inasmuch as the Fed really hasn't had to deal with any inflation since the beginning of Quantitative Easing in 2009.  It's obviously easier to print money in a deflation, since liquidity is being destroyed faster than it's being created, leaving you lots of wiggle room.  When inflation begins to take hold, then printing money no longer leads to "pretend wealth," it leads directly to wealth destruction, as you dilute the value of each dollar that's already in circulation.  When inflation is underway, printing money becomes a silent tax on the working class, because you are essentially stealing the value of their wages and savings and putting that value into your freshly-minted currency.

Of course, years of deflation have led naïve politicians to believe there are no consequences to money printing, so, as so often happens, the current generation is ill-prepared for what seems to be developing.

Young people often believe that "old-fashioned" wisdom is outdated, when it should instead be viewed as the collective lessons that humanity has learned through thousands of years of trial and error.

“Tradition is a set of solutions for which we have forgotten the problems. Throw away the solution and you get the problem back. Sometimes the problem has mutated or disappeared. Often it is still there as strong as it ever was.” ― Donald Kingsbury

Trade safe.

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