Inflation occurs in regards to expansion of the money supply, relative to the expansion of production.
In this case, the US has printed trillions of new dollars. To be precise, 340 billion each month is being wire-transferred to banks to buy back bonds. Money is being dumped into circulation and this money is chasing goods and services. More money chasing goods and services leads into more buying and more buying leads into price rises to compensate.
In terms of production, production is majorly down, Covid-19 has disrupted smaller businesses that make up a large proportion of production that is readily consumed: restaurants, entertainment, cruises, travel, etc...
Why hasn't the inflation happened yet? because consumption is down. People's consumption has gone down as they are not spending as much large amounts of money, but rather investing or saving. If consumption goes up, the new money supply would adjust to the expanded money supply, inflating the US dollar extremely quickly.
You are 💯 correct in everything except why inflation has not yet occurred. The federal reserve system is the reason it hasn’t yet occurred. They are the proverbial boy with his finger in a dyke, keeping the flood of massive inflation buy reverse buying and the pumping of cash into the system to buy up the repos. This has been happening for over a year now at unprecedented levels. But the system will explode, the more they print money to solve it short terms, the bigger the flood will be long term. Time runs out for the whole piano scheme to collapse on itself, and the world economy with us, and then...the great reset. We have been warned for decades, fiat money was always meant to fail eventually, to lead us to the ultimate chaos out of which the powers that be find order...to our detriment.
while that is most certainly a factor, the fact that consumption has decreased, cannot be ignored. The stimulus dollars were as direct of inflation as it comes. But yes, the repo market is bound to spike sometime in 2021.
For those not that economically in the know, the repo market, is the market that is designed for banks to convert collateral into cash. Recently Collateral is in much, much higher demand than cash, which has caused negative interest rates in the repo market. That means that the banks have no confidence in cash, much preferring safer collateral, like reserves.
The Repo market spiked a while back and people went crazy over that. It was for less than 1 day, but people thought our economy was going into meltdown.
Because our government is taking the absolute piss by printing huge amounts. This means that those holding dollars or dollar based debt are going to find them worth far less in real terms.
You raise something that has bugged me for years, every Pede should understand how finance works, there is nothing wrong with your question but these basics should be covered in high school but they aren't.
Why will inflation happen?
We've been printing money nonstop like a mafia counterfeit ring.
Are we printing trillion dollar bills like Zimbabwe?
Inflation occurs in regards to expansion of the money supply, relative to the expansion of production.
In this case, the US has printed trillions of new dollars. To be precise, 340 billion each month is being wire-transferred to banks to buy back bonds. Money is being dumped into circulation and this money is chasing goods and services. More money chasing goods and services leads into more buying and more buying leads into price rises to compensate.
In terms of production, production is majorly down, Covid-19 has disrupted smaller businesses that make up a large proportion of production that is readily consumed: restaurants, entertainment, cruises, travel, etc...
Why hasn't the inflation happened yet? because consumption is down. People's consumption has gone down as they are not spending as much large amounts of money, but rather investing or saving. If consumption goes up, the new money supply would adjust to the expanded money supply, inflating the US dollar extremely quickly.
You are 💯 correct in everything except why inflation has not yet occurred. The federal reserve system is the reason it hasn’t yet occurred. They are the proverbial boy with his finger in a dyke, keeping the flood of massive inflation buy reverse buying and the pumping of cash into the system to buy up the repos. This has been happening for over a year now at unprecedented levels. But the system will explode, the more they print money to solve it short terms, the bigger the flood will be long term. Time runs out for the whole piano scheme to collapse on itself, and the world economy with us, and then...the great reset. We have been warned for decades, fiat money was always meant to fail eventually, to lead us to the ultimate chaos out of which the powers that be find order...to our detriment.
while that is most certainly a factor, the fact that consumption has decreased, cannot be ignored. The stimulus dollars were as direct of inflation as it comes. But yes, the repo market is bound to spike sometime in 2021.
For those not that economically in the know, the repo market, is the market that is designed for banks to convert collateral into cash. Recently Collateral is in much, much higher demand than cash, which has caused negative interest rates in the repo market. That means that the banks have no confidence in cash, much preferring safer collateral, like reserves.
The Repo market spiked a while back and people went crazy over that. It was for less than 1 day, but people thought our economy was going into meltdown.
This is true. But the repo injections have been occurring and have not nearly peaked. The fed is running the markets hot. Please read: https://www.moneyweb.co.za/news/economy/is-the-punchbowl-half-full-or-half-empty/
If I am missing something I appreciate your input.
Because our government is taking the absolute piss by printing huge amounts. This means that those holding dollars or dollar based debt are going to find them worth far less in real terms.
You raise something that has bugged me for years, every Pede should understand how finance works, there is nothing wrong with your question but these basics should be covered in high school but they aren't.
It’s cyclical, inflation affects reserve currency and vice versa. Read this: https://blog.oneuptrader.com/analysis/inflation-threat-to-usd-as-reserve-currency/