The last three months of core PCE, the Fed's favorite metric, is growing at nearly 5%, a 30-year high.
This is being dismissed as part of the reopening process. Careful with this logic.
1/6
This is being dismissed as part of the reopening process. Careful with this logic.
1/6
Friday the UMich released its latest Consumer confidence survey, which also asks about inflation.
The outlook over the next 5-10 yrs is rising and at a decade high.
The 1yr outlook spiked to a 13yr high … highest since $145 crude.
Consumers believe it is coming
2/6
The outlook over the next 5-10 yrs is rising and at a decade high.
The 1yr outlook spiked to a 13yr high … highest since $145 crude.
Consumers believe it is coming
2/6
But this is 2021, and inflation is measured not by prices, or expectations of what one will pay. It is what the bond market thinks.
So, you cannot have an inflation problem if bond yields are not shooting higher.
I think this is backward logic
3/6
bloomberg.com/opinion/articl…
So, you cannot have an inflation problem if bond yields are not shooting higher.
I think this is backward logic
3/6
bloomberg.com/opinion/articl…
But the bond market is "smart." We should not ignore yields. True.
But the median age of a US worker is 43. They have not experienced inflation in their career. No one remembers what inflation looks like. And the last 30 years has rewarded one for dismissing it.
4/6
But the median age of a US worker is 43. They have not experienced inflation in their career. No one remembers what inflation looks like. And the last 30 years has rewarded one for dismissing it.
4/6
The most interesting Fed Speeches are the members that leave. They stop reciting talking points and tell you what they think.
In 2017 Dan Tarillo left the Fed and said the quiet part out loud … no one knows what causes inflation.
5/6
ft.com/content/a5438c…
In 2017 Dan Tarillo left the Fed and said the quiet part out loud … no one knows what causes inflation.
5/6
ft.com/content/a5438c…
So we see evidence of inflation but dismiss it. Why? The bond mkt is not reacting (>ylds) as it is made up of traders they never saw inflation.
Economists stick with reasons that worked in dismissing it for 30yrs, like tech, demographics and globalization.
Change is hard
6/6
Economists stick with reasons that worked in dismissing it for 30yrs, like tech, demographics and globalization.
Change is hard
6/6
• • •
Missing some Tweet in this thread? You can try to
force a refresh
