It was sweetened bread, dammit.*
From Harley Bassman, The Convexity Maven, at Simplify Asset Management, April 26:
Much ink has been spilled over the years by the erudite punditry detailing two different types of Inflation. The first is driven by excessive money creation, a concept advanced by the Nobel prize laureate Milton Friedman who offered that “...inflation is always and everywhere a monetary phenomenon”.
The second is sourced from temporary supply/demand imbalances that are self- correcting over the medium-term and are therefore not “real” inflation. It is claimed by (whom I will call) “Team Transitory” that this is the type of inflation presently vexing society.
This is a difference without a distinction when the average consumer now spends $342 more per month (NBC). I would dub this: “Let them eat cake” economics.
For those of you who are a bit rusty on your late Eighteenth century French history, Marie Antionette was the daughter of Francis I, the Holy Roman Emperor, and Maria Theresa, ruler of the Hapsburg Empire. Marie became the Queen of France by marriage to King Louis XVI, the last of the Bourbon monarchs whose reign was cut short (literally) by the French Revolution.
Exemplifying the monarchy’s disconnect from the plight of their citizens, when Queen Marie was informed that the peasants had no bread, it is claimed she infamously suggested to “let them eat brioche (cake)”; which was soon followed by her own trip to the guillotine.
Circling back to the top, this rhymes with our present-day financial aristocracy arguing over which First Cru French Chablis is best paired with the grilled Hiramasa at Le Bernardin while the average American civilian is struggling over the decision between asada or pollo at Chipotle for date night.
The Inflation Genie
As a first order of business, let’s stipulate that the -Riesling line- increase in Major Central Bank assets found their way into -Bordeaux line- Financial Assets. This chart should unquestionably settle the falsehood that a Central Bank cannot create inflation if it so desires, with the caveat that rate targeting can be inexact
Inflation was a feature, not a bug, in the US Federal Reserve Bank’s (the FED) policy of Quantitative Easing (QE). The goal was to elevate wages for Labor to offset the recession that followed the Great Financial Crisis (GFC); unfortunately, it jumped asset prices, a public policy mishap that has played a large part in our current disorderly politics. The reversal via Quantitative Tightening (QT) is the FEDs primary policy tool to jam the inflation Genie back into the lamp....
....MUCH MORE
Mr. Bassman is far too kind to the powers that be. There is no evidence the goal of QE was to elevate wages. Further, even if that was the plan, it sure as hell didn't work.
*If interested see: "Pain, brioche, and the language of taxation" or:
"Eat brioche rather than bread."
