Thread by @hendry_hugh

"Fiscal handouts inflationary, eventually?" someone asks?

Not like this. Not erratic, one-off pyts that create a chaotic surge in orders that can't be fulfilled because the whole world had been put on a leave of absence; I mean who really thought this was gonna work out well over and above the morality deficit levelling justifications ?

So with the whole world laid off you give the US consumer cash and implore them to spend. BOOM! How are you supposed to measure reality or recurring demand in a science fiction movie? Don't answer that...

And so of course in the valley of the blind, idling factories can't respond quick enough, shelves empty rapidly, distributors panic and ass cover becomes the default and over ordering its palliative and would you believe it but we inflate the price of everything ?

...until true recurring & lower demand reasserts itself. But no you counter, the fiscal suits are gonna do it again and again. Maybe. All I'm asking is that they do it again and again - I just need another 2 massive helicopter drops before the end of next year to be convinced...

But even then, if they're really going to fill the mega trillion deficit left by inhibited bank behaviour, you're gonna need more than that. Those sums are going to need to grow exponentially to offset the demise of a bullish frictional reserve banking cycle

And for sure you're gonna need the Fed to stay pat and not raise interest rates. @JeffSnider_AIP has a piece showing CPI peaking at annualised rates of 12% in 1950 from KWar onset. You think today's feeble grey people who form global CB policy could resist hiking rates like then?

The governing party in the UK is going apoplectic about its cabinet gunning debt to gdp to 80pc of the economy. They've just instigated big tax hikes taking the fiscal levy back to the highs last seen 60 y ago. That sh$t don't help your cause. Politics always gets in the way...

That's the point. The inflationary 70s were 50 y ago ! As far away as the G Depression of the 1930s was as I began my career. Hyperinflation just hasn't occurred in proper regulated democracies for 100 y. That points to huge cultural fire breaks that prevent such inflation .

The biggest impediment is the magnitude of publicly traded debt markets. Try repricing the Treasury market, supposing you found a means to generate the currency elasticity necessary to sustain ever accelerating price increases with an almost defunct bank sector.

But say your fiscal brothers managed such alchemy, try repricing 10 y T yields to 5% or 10 %...it's as though we've culturally accepted that hi (not hyper) inflation is such a peril to our society that we've sewn a cyanide pill into the fabric of the giant financial edifice

To borrow from the legendary Mr Mojo Risin
Five to one, baby
One in five
No one here gets out alive

It get's worse because banking has changed. There's a new currency out there. Its $ collateral . So long as you can post $COL you're likely to receive credit. It's why I'm betting china will brake hard - their private sector is receiving the mother of all $ collateral calls...

Whilst I'm ready to move on and ignore the almighty mess brewing in China - sure, their system is just more resilient than our flaky system, until it isn't (!) but I got more important things to say because...

What happens when runaway inflation destroys the sanctity of the only sure thing presently regulating our reality. The assured sanctuary of the US T bill ? You're gonna see the mother of all 2008 type collateral deficits. Inflation you say...your ballroom days are over, baby...

Which kind of answers the 2nd question about CBDC - I'm gonna be flippant cause I got to sign off but always makes me think of CBD oil and for sure the latter would seem more relevant balm if we did indeed have to cross the bridges explored above. But I can let rip an other time.

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