Can someone explain why we are seeing inflation now after this round of QE, but we never saw inflation after the QE in USA after the GFC. Is it just because that the numbers are bigger.
Can someone explain why we are seeing inflation now after this round of QE, but we never saw inflation after the QE in USA after the GFC. Is it just because that the numbers are bigger.
Because the numbers this time were staggeringly large. In addition it was done across the world simultaneously.
The other thing to remember is whe have consistently had non-tradable inflation above the CPI, but it gets dragged down by importing “deflation” through cheaper goods (mainly from China). We still have inflation but have masked it for 40 years by bringing around 25% of the planets population (China/India) into the global manufacturing workforce driving down the price of goods. Due to geopolitical events (covid/Ukraine), demographic (population in China aging fast due to 1 child policy) and socioeconomic (China has seen some of the fastest wage growth in history) that imported deflation impact will lessen over the next decade.
The idea we have pervasive deflation is built on the assumption we can keep adding new “china’s” to the global workforce, but that was a one-off never to be repeated on that scale
That's fair on the lack of an ongoing positive supply shock from China. I think though we forget the positive supply shock from tech in services is very much still around and will only get bigger.
Thanks RG. Good question. You're right. The central banks printed US$9 trillion in less tha a year after Covid arrived, whereas they printed less than US$3t during the whole of the GFC. The spark that lit the pile of paper this time was the supply shocks from Covid and the war at the same time. Here's some detail on that. https://www.yardeni.com/pub/balsheetwk.pdf
Can someone explain why we are seeing inflation now after this round of QE, but we never saw inflation after the QE in USA after the GFC. Is it just because that the numbers are bigger.
Because the numbers this time were staggeringly large. In addition it was done across the world simultaneously.
The other thing to remember is whe have consistently had non-tradable inflation above the CPI, but it gets dragged down by importing “deflation” through cheaper goods (mainly from China). We still have inflation but have masked it for 40 years by bringing around 25% of the planets population (China/India) into the global manufacturing workforce driving down the price of goods. Due to geopolitical events (covid/Ukraine), demographic (population in China aging fast due to 1 child policy) and socioeconomic (China has seen some of the fastest wage growth in history) that imported deflation impact will lessen over the next decade.
The idea we have pervasive deflation is built on the assumption we can keep adding new “china’s” to the global workforce, but that was a one-off never to be repeated on that scale
That's fair on the lack of an ongoing positive supply shock from China. I think though we forget the positive supply shock from tech in services is very much still around and will only get bigger.
Thanks RG. Good question. You're right. The central banks printed US$9 trillion in less tha a year after Covid arrived, whereas they printed less than US$3t during the whole of the GFC. The spark that lit the pile of paper this time was the supply shocks from Covid and the war at the same time. Here's some detail on that. https://www.yardeni.com/pub/balsheetwk.pdf