ECONOMY - 05/05/2021Inflation is not some potential issue down the road. Inflation is already here.
1) Capacity Constraints
The entire world shut down. Businesses and factories everywhere closed, and plenty of companies went out of business. Companies who survived took radical steps to conserve cash- laying off workers, liquidating inventory, and selling equipment. The capacity in the system is greatly reduced.
2) Restriction lunacy
Hardly anyone talks about this... but just think about all the idiotic rules that people have to follow now. Self-isolating after an accidental sneezing. Induced passivity instead of stimulation to activity.
New costs for companies. Paying employees to stand at the door counting people, taking temperature, stopping or equipping customers with PPE. Spending on the PPE… masks, gloves, hand sanitizer, etc. Legions of workers to chemically scrub every nook and cranny of the premises.
“For our safety”. All of this require tons of money, and the extra costs eventually get passed on to consumers. Most likely, these measures are not going away… like the extreme security check imposed on every airports 20 years ago up to date still is there...decade after the terrorists found other targets.
3) Fake money printing
Obviously the governments don’t have the money to pay people to stay home. So they have to create it. The more money the government spends, the more the Central Bank prints. And as this freshly created money makes its way through the economy, it typically ends up in financial markets, driving asset prices higher.
It’s not a coincidence that record sums of money has been created and the stock market is simultaneously at a record high. Ditto for real estate, cryptocurrencies, collectibles, etc. Many commodities are also at record highs. Lumber prices have never been higher. Oil prices surged to $70 today. Higher commodity prices eventually lead to higher consumer prices.
High lumber prices, for example, mean that housing costs increase. Higher fuel prices mean higher transport costs, which increases the price of almost everything.
So as long as the government is printing money and holding rates down to historic lows, these prices will likely keep rising. But it’s clear that the government’s approach will be to ignore or dismiss inflation risks. And one day, the inflation explode as a bomb.
Be sure you are far away from the epicenter where it damage most – that is big cities. Be sure you have a solid property. Be sure you have your own transportation device and access to whatever makes it move. Be sure you do not owe more than you have in assets. And last but not least, be sure you have the best fortune in the vault. That is good capacity in your own mind and body.
