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It's Not Transitory, It's the New Normal: The dollar’s demotion will be painful
@Panzerhund @TimeBandit @Highlander
“The dollar’s demotion will be painful. Americans’ monetary standard-of-living will decline. It’s been a year now and it’s still hard to know if the things you’re looking for at the grocery store will be there. As it becomes increasingly clear that the perpetual shortages of products and labor are no more transitory than inflation is, prices will rise substantially to reflect reality. It’s nice when the house or the 401(k) goes up 10% in a year. It’s not so fun when the price of bread and milk do.”
Consumer prices beat consensus estimates for the fifth consecutive month. Again, we’re told it’s transitory. It was another bad month of weather for the harvests just like it’s another bad month for the cost of cars. Even if the annualized rate falls back from 6% to 2%–which it won’t–it wouldn’t be transitory. Transitory requires the second part of the year to come in at a deflationary -2%. That’s how things get back 2% for the year. Easy peasy, ha!
Or maybe not ha!. Treasury yields fell on the CPI beat. The 30-year is down on the week, paying a measly 2.15%. The Fed is going to tighten so hard nominal prices will fall! If consumer price decreases are coming, a guaranteed 2%+ return is the perspicacious play!
In seriousness, tie your money up for 30 years to earn an equivalent real yield of -4%? Who would possibly be so dumb?! AT&T dividends are thrice that. Nobody who isn’t a central bank is going to buy long-term treasuries. Lender of last resort takes on a new meaning!
The TreasureFed is holding rates down because if they were allowed to clear the open market, rates would fly up to 5% or 10%, sending the economy crashing in a way that makes 2008 look like a walk in the park by comparison. The longer rates are artificially held down despite ever-increasing trade and budget deficits, the more the rest of the world will pull out of the dollar market.
Consumer prices beat consensus estimates for the fifth consecutive month. Again, we're told it's transitory. It was another bad month of weather for the harvests just like it's another bad month for the cost of cars. Even if the annualized rate falls back from 6% to 2%--which it won't--it...