[generalpass]

> Old people are generally in bonds at this point in their life. Bonds have been on a tear lately. Their investments are doing OK.

This is assuming no CPI increases from all the money creation, especially if they send the money directly to consumers, likely reducing the Cantillon effects.

And "lately" isn't after weeks or months of substantially reduced economic activity.

[nradov]

Consumer price inflation is mostly a monetary phenomenon. The increased money supply is only one side of the equation. We must also subtract the deflationary effects of debt defaults. Banks create new money by issuing loans, and when debtors default the banks are forced to write down the value of those loans. Thus money which formerly existed in the financial system vanishes.

So for the next year or so as defaults accelerate I expect that deflation will be a larger concern than inflation, and central banks will try to counter that by large, frequent injections of new money.

[generalpass]

> Consumer price inflation is mostly a monetary phenomenon. The increased money supply is only one side of the equation. We must also subtract the deflationary effects of debt defaults. Banks create new money by issuing loans, and when debtors default the banks are forced to write down the value of those loans. Thus money which formerly existed in the financial system vanishes.

> So for the next year or so as defaults accelerate I expect that deflation will be a larger concern than inflation, and central banks will try to counter that by large, frequent injections of new money.

The flow of new money creation is not evenly distributed throughout an economy, and this is called the Cantillon Effect (which can also be applied to deflation).

The new money creation has been going strong for some time now, but hasn't been flowing into sectors measured by the CPI. This has kept CPI increases relatively low in comparison to the increases.

However, send $1000 per month to every American and nearly all of that will go into sectors measured by the CPI, which will then go up.

[scurvy]

> And "lately" isn't after weeks or months of substantially reduced economic activity.

They'll be even higher if/when that happens. They're not in bonds for the interest. They're in bonds for safety and price appreciation.

[generalpass]

> > And "lately" isn't after weeks or months of substantially reduced economic activity.

> They'll be even higher if/when that happens. They're not in bonds for the interest. They're in bonds for safety and price appreciation.

Assuming someone is interested in buying those bonds, since during inflation physical assets (e.g., precious metals) tend to be what buyers prefer.

[scurvy]

That's a retro thinking back to the era of the bond vigilantes. That's gone. There's so much stuatory purchases of t-bills that will outweigh any inflationary pressure from QE4. The demand for t-bills was almost insatiable _before_ this mess. Now, it's even more.

T-bills will do just fine despite any outward appearances of inflation. BTW, would rather load up on real estate than "precious" metals. Gold is a relic from a bygone era.

[generalpass]

> That's a retro thinking back to the era of the bond vigilantes. That's gone. There's so much stuatory purchases of t-bills that will outweigh any inflationary pressure from QE4. The demand for t-bills was almost insatiable _before_ this mess. Now, it's even more.

> T-bills will do just fine despite any outward appearances of inflation. BTW, would rather load up on real estate than "precious" metals. Gold is a relic from a bygone era.

It is further back to the inflationary period of the 70s, which is the last period that there was a mass flight from dollars due to the rate of CPI increase.

Investopedia[1] states the problem related to T-Bills rather well:

> Treasuries also have to compete with inflation, which measures the pace of rising prices in the economy. Even if T-Bills are the most liquid and safest debt security in the market, fewer investors tend to buy them in times when the inflation rate is higher than the T-bill return. For example, if an investor bought a T-Bill with a 2% yield while inflation was at 3%, the investor would have a net loss on the investment when measured in real terms. As a result, T-bill prices tend to fall during inflationary periods as investors sell them and opt for higher-yielding investments.

So when the CPI is going up and dollars are being used to bid up the price of physical assets, who is buying T-Bills?

[1] https://www.investopedia.com/terms/t/treasurybill.asp

[scurvy]

You're comparing stagflation double digit interest rates from the 1970s to today? We'll be in a declining or low rate environment for the rest of our lifetime. We'll never see double digit interest rates again.

Gold is useless.

[generalpass]

> You're comparing stagflation double digit interest rates from the 1970s to today? We'll be in a declining or low rate environment for the rest of our lifetime. We'll never see double digit interest rates again.

> Gold is useless.

I am making the comparison on the worst-case assumption that $1000 is sent to every American every month (extended lock-down of the economy will still require people to have some measure of income or they will riot in the streets), so that's $330 billion pumped into consumer goods sectors every month. Your position is that this will not cause CPI rate of increase to go up?

I just reread my post and I can't find the word "gold" anywhere in the post and I am assuming that your claim is to be amended to state "Gold is useless [as an asset]" since it is one of the most useful minerals known to mankind. Where do you get this from?

"Physical assets" can be anything physical: a building; a lot's worth of used cars; a warehouse full of Play-Doh, etc. When people don't want dollars or financial assets, they will replace them with whatever seems like a better deal.