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Economic Inflation....the starting point of a new great depression?

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BigSexyCat

BigSexyCat

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Nov 29, 2008
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Actually, my brother, a 401K manager, says that it is a given that tech stocks will pull back (they cannot go up forever) while most of the other sectors will move up as the nation comes out of the pandemic. IIRC, he also told me that a huge % of the S&P 500 rise was due to five stocks, e.g., Apple, Amazon, Google. The other 495 or so were flat to a little negative in 2020 (don't quote me, may have the time frame wrong). The economy as a whole has a TOOONNNNN of money in savings and Wall Street, and once things open up, I would not be surprised to see a surge in spending and a strong recovery (lots of economists say the same)

Naturally, that first trip when only half the hotels and restaurants are open may be pricey (to say the least), but the economy fell so far, there is only one way to go.

Besides, as to the OP, gloomy forecasters have been correct on 15 of the last four recessions. ;)
 
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BigSexyCat said:
Hope I'm wrong but with the impending $15 minimum wage hike, the government nearly destroying small businesses with the lockdowns, the dollar drifting toward losing it's standing as the worlds top currency, etc. It all setups a scenario of impending economic doom.

https://www.thestreet.com/investing/dow-futures-tech-stocks-slide-as-inflation-signals-mount

https://www.newsweek.com/will-us-dollar-lose-its-place-worlds-no-1-reserve-currency-1567224
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the 15$ an hr won’t pass the senate and they will either drop it or accept 11-12$ Hr compromise. There is a big question whether that can even pass through reconciliation. If it were to pass there will be a lot of full time workers moved to half time and part time workers hours cut. 15$ minimum wage won’t translate across the board

inflation has been inevitable since 9-11 and has hit the housing market already. In some cases massive inflation. Consumer goods won’t see a big inflation hit because of cheap labor but like housing food has already seen it.
 
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Tskware said:
Actually, my brother, a 401K manager, says that it is a given that tech stocks will pull back (they cannot go up forever) while most of the other sectors will move up as the nation comes out of the pandemic. IIRC, he also told me that a huge % of the S&P 500 rise was due to five stocks, e.g., Apple, Amazon, Google. The other 495 or so were flat to a little negative in 2020 (don't quote me, may have the time frame wrong). The economy as a whole has a TOOONNNNN of money in savings and Wall Street, and once things open up, I would not be surprised to see a surge in spending and a strong recovery (lots of economists say the same)

Naturally, that first trip when only half the hotels and restaurants are open may be pricey (to say the least), but the economy fell so far, there is only one way to go.

Besides, as to the OP, gloomy forecasters have been correct on 15 of the last four recessions. ;)
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The aggregate amount of money in savings and Wall Street isn't going to matter if the government destroys the value of the dollar by printing more money. If the value of the dollar is expected to decrease as the government tries to cover its debts and you actively manage your finances as an individual, company, hedge fund, or foreign investor, then why would you choose to have cash holdings in American dollars? You wouldn't. You would seek investments with greater intrinsic value. If people don't want to hold cash in American currency, then why would you think this is a positive thing for the overall economy of our country?
 
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#1 - The Congressional Budget Office put the hold on the $15/wage.....at least for a while. And, the original proposals for the wage hike called to slowly increase it over a 4-5 yr span. So, it's likely that any inflation that comes from the wage hike will take a while.....and will occur slowly.

#2 - The Fed tries to keep inflation around 2-3% on any given year. This helps to promote economy while not allowing hyperinflation too quickly. It's extremely possible that the Fed could manipulate inflation to keep it around 3-3.5%....thus preventing things to get out of hand too quickly.

#3 - Many (including myself) feel that the US is getting ready to go through another industrial revolution. Alternative energies, alternative currencies, electric and autonomous vehicles, space exploration, healthcare and genomics, marijuana, AI, internet/robotics/other technologies, etc. All are going to explode within the next 10-20 yrs. If the US can keep GDP up, the federal debt will not cause hyperinflation.......however, if we falter........OUCH!
 
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Tskware said:
Actually, my brother, a 401K manager, says that it is a given that tech stocks will pull back (they cannot go up forever) while most of the other sectors will move up as the nation comes out of the pandemic. IIRC, he also told me that a huge % of the S&P 500 rise was due to five stocks, e.g., Apple, Amazon, Google. The other 495 or so were flat to a little negative in 2020 (don't quote me, may have the time frame wrong). The economy as a whole has a TOOONNNNN of money in savings and Wall Street, and once things open up, I would not be surprised to see a surge in spending and a strong recovery (lots of economists say the same)
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Yes, the market is mostly artificially inflated right now.......so, if something doesn't happen, it will drop. The gub'ment either talking or actually doing stimulus packages has helped keep it inflated. The hope is that the market will stay falsely inflated while the country opens back up and rises in production to meet the market.

I tend to be very fiscally minded.....and I hate the thought of crazy gub'ment spending......but stimulus packages might be the thing that keeps the market from crashing.
 
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Ron Mehico said:
[eyeroll] The world is ending everyone panic!!!!

This sounds about as awful as all the liberals whining the world was ending when Trump was elected.
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Bingo, have also been told (by Hilliard/Baird + Merrill Lynch) that over many decades there is very little difference in return in the market when Republicans are in office vs. Democrats, the economy is simply bigger than politics.
 
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Tskware said:
Bingo, have also been told (by Hilliard/Baird + Merrill Lynch) that over many decades there is very little difference in return in the market when Republicans are in office vs. Democrats, the economy is simply bigger than politics.
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And then with an asterisk or muttered mention, they will say, "Historical results are not indicative of future performance" to cover their asses.

The economy is bigger than politics until it's not. The response to the coronavirus based on political leadership was proof of that.
 
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BlueRaider22 said:
#1 - The Congressional Budget Office put the hold on the $15/wage.....at least for a while. And, the original proposals for the wage hike called to slowly increase it over a 4-5 yr span. So, it's likely that any inflation that comes from the wage hike will take a while.....and will occur slowly.

#2 - The Fed tries to keep inflation around 2-3% on any given year. This helps to promote economy while not allowing hyperinflation too quickly. It's extremely possible that the Fed could manipulate inflation to keep it around 3-3.5%....thus preventing things to get out of hand too quickly.

#3 - Many (including myself) feel that the US is getting ready to go through another industrial revolution. Alternative energies, alternative currencies, electric and autonomous vehicles, space exploration, healthcare and genomics, marijuana, AI, internet/robotics/other technologies, etc. All are going to explode within the next 10-20 yrs. If the US can keep GDP up, the federal debt will not cause hyperinflation.......however, if we falter........OUCH!
Click to expand...
I agree. I think we are about to pop off personally. Everyone in the country is going to travel over the next six months. Ball games and concerts are about to return in a big way. It's going to be a roaring several years IMO. This economic expansion that started in 2010 could last another decade easy with Covid being the only blip. Technology is improving so fast.
 
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BigSexyCat said:
View embedded media
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The cost of materials are going up up and away. Supply line disruption, increasing energy prices, and now cost of labor now artificially increased. So you have a triple whammy.

Tons of consolidation at the top thanks to government interference via lockdown. Anything not purchased was or will be out of business. Now those 4 or 5 mega companies have more power than the government itself. The economy and/or price of goods is whatever they say it is; and that should terrify people.

Also consider the bailouts, handouts, etc. There's just zero chance we don't experience a good deal of inflation. The only thing that might save us from hyper inflation is that many other developed countries will all be in much the same boat. Except china of course.

Better hope the g20 summit doesn't swing to the yuan as global currency. The yuan will be stronger positioned than ever imo. If it does, we're toast for sure.

It's a recipe for disaster imo. I can't imagine how people much smarter than me can see and know this, yet do it anyway. Our only hope short term is the fed keeping the rates basically zero and somehow we get some policy changes in the very near future.
 
Tskware said:
Bingo, have also been told (by Hilliard/Baird + Merrill Lynch) that over many decades there is very little difference in return in the market when Republicans are in office vs. Democrats, the economy is simply bigger than politics.
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The economy and the stock market are not the same. That's the real takeaway.

A better marker would be labor participation and tracking positions open. Imo that's a way better indicator of the economy.
 
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bigblueinsanity said:
It's a recipe for disaster imo. I can't imagine how people much smarter than me can see and know this, yet do it anyway. Our only hope short term is the fed keeping the rates basically zero and somehow we get some policy changes in the very near future.
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In the case of inflation becoming a problem, though, wouldn't the response be to finally see interest rates nudge up to a level they haven't been at since 2006?

Janet Yellen is a dove on inflation, though, so my fear is she doesn't take it seriously until its a bigger issue.
 
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They have been saying that they would allow an amount of inflation to occur above 2% to 2.5% for months now.

If that increases interest rates, good. Interest rates should go up. That shows a healthy economy. I think we held them too low before Covid. If we had raised them before, we'd have had much more power and wiggle room when the pandemic occured.

That's my Monday morning QB rant.
 
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A $900 billion stimulus was passed in December. Congress is working on another $1.9 Trillion package that will likely pass shortly. Next they plan to move on to a huge $3 Trillion package of infrastructure and tech package. That is total of $5.8 Trillion in stimulus. That total is 7 times larger than the Obama stimulus package which was about $830 billion and spent over multiple years. Even former Clinton economic advisor, Larry Summers, is sounding the warning bell. We are eventually looking down the barrel of run away inflation after this spending orgy. For now, enjoy the run up in the stock market.
 
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bigblueinsanity said:
The economy and the stock market are not the same. That's the real takeaway.

A better marker would be labor participation and tracking positions open. Imo that's a way better indicator of the economy.
Click to expand...

Largely agree with Stock Market does not equal economy, but disagree that we are on the verge of another depression (and not saying you said that, have not gone back through the entire thread to see who said what)
 
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It's unfortunate that people have cried wolf so often in the past. Now too few pay attention to the issue, but the wolf does come eventually. The only thing any individual can do is be prepared through risk mitigation, and hope they come out on the right side of economic history.
 
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Tskware said:
Largely agree with Stock Market does not equal economy, but disagree that we are on the verge of another depression (and not saying you said that, have not gone back through the entire thread to see who said what)
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Agreed. I don't think we're on a verge of another depression either.

And I do agree that the stock market can be an indicator of a good economy. The stock market "is in short term a voting machine, but in long term a weighing machine." It's probably not the best to use the market as an indicator of the economy in the present tense.......but it certainly can give you a good indication as to the past and future tense.
 
BlueRaider22 said:
Agreed. I don't think we're on a verge of another depression either.

And I do agree that the stock market can be an indicator of a good economy. The stock market "is in short term a voting machine, but in long term a weighing machine." It's probably not the best to use the market as an indicator of the economy in the present tense.......but it certainly can give you a good indication as to the past and future tense.
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Never heard that, but it is a good quote.
 
Tskware said:
Largely agree with Stock Market does not equal economy, but disagree that we are on the verge of another depression (and not saying you said that, have not gone back through the entire thread to see who said what)
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I don't think we are on the verge of a great depression either. I think what we're about to see will be much different than that but potentially equally as devastating. We're about to see the confirmation of the shift of global power, especially economic, to china.
 
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bigblueinsanity said:
Most everyone cared regardless of names or letters next to them. Only partisan hacks base their positions based on which team is in charge.

Wouldn't know anyone like that would you?
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I agree that both parties like to spend. I would stipulate that the dems like to spend more. A prime example would be the recently passed Stimulus. The dems were demanding over $3 Trillion while the GOP was trying to keep it under $1 Trillion. The GOP got its way only after the election and the dems knew that they could come back for the other $2 trillion.
 
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DSmith21 said:
I agree that both parties like to spend. I would stipulate that the dems like to spend more. A prime example would be the recently passed Stimulus. The dems were demanding over $3 Trillion while the GOP was trying to keep it under $1 Trillion. The GOP got its way only after the election and the dems knew that they could come back for the other $2 trillion.
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The bill always comes due. Someone must pay either in currency or in kind.

We just can't keep spending this way, no matter what catastrophic event unfolds. The government can't make people whole on every occasion.
 
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I'll be like Charlton Heston in Omega Man. Did you see it? Beauty, eh!

LscJS0x.gif
 
bigblueinsanity said:
Most everyone cared regardless of names or letters next to them. Only partisan hacks base their positions based on which team is in charge.

Wouldn't know anyone like that would you?
Click to expand...
bigblueinsanity said:
The bill always comes due. Someone must pay either in currency or in kind.

We just can't keep spending this way, no matter what catastrophic event unfolds. The government can't make people whole on every occasion.
Click to expand...
2021- The return of the Hawks!
 
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