If we’ve heard anything in recent years, it’s that fiat currencies have become very bad investments. Inflation has been skyrocketing for ages, and even serious discussions about hyperinflation are occurring. Darius Dale of 42 Macro, however, thinks otherwise.
Inflation still higher than expected
In Real Visions Daily Briefing from last Wednesday Dale states that inflation is likely to ease. In addition, it is likely that economic growth will slow down He bases this on the trends that can be seen. It should be emphasized that this is the inflation of the US dollar, and not the euro, for example.
The US central bank, the Federal Reserve, therefore plays an important role here. The Core PCE (Personal Consumption Expenditures) is the primary measure of inflation for the Fed. All parts of the Core PCE are still at higher values than what the central bank is aiming for.
At the same time, the economy is still doing very well and it is easy to take out loans, the analyst emphasizes. A lot of money circulating in the economy has been borrowed and a Applying for a loan is currently just as easy as during the dot com bubble (internet bubble). However, that will change one day.
Federal Reserve is forced into action
All of this forces the US central bank to take action. Interest rates are still very low. If it gets high enough, inflation could disappear quickly. Still, Dale thinks a “soft landing” where inflation will fall and the economy remains whole is unlikely.
The market for US government bonds (treasury bonds) also sees this transition from inflation to deflation coming. Many of these bonds have been bought in recent days, which is clearly reflected in the volume. This market is often said to “tell the truth” because institutions that buy these assets often see the risks coming faster than investors in other markets. It is aAlways good to hear counter arguments.