He Knows it yet he is saying

Investment Analysis Clubs Liquid Lounge
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For starters, if you don’t know, Bessent has a long history in wall street hedge fund world worked for George Soros (yeap), with Stan Druckenmiller and is the founder and runs Key Square Capital Management. He is a Billionaire that much we know, how rich we don’t know!!!

I listen to Capital allocators podcast where Scott Bessent was the guest.

So in this podcast, Bessent says

Tariffs can’t be inflationary because if the price of one thing goes up, unless you give people more money, then they have less money to spend on the other thing, so there is no inflation

Now, he is someone who is very smart, made billions in hedge fund, primarily focused on macro. So he knows what is tariff’s and their impact. Now, when he says they are not going to be inflationary, under normal circumstances, you want to believe him or at least want to take his argument seriously. However, this is a blatant misrepresentation.

This is not on the scale of “inflation is transitory”, which in hindsight is true and FED believed, what they didn’t realize it when you are going through it, people don’t enjoy it and US is so spoiled in having goldilocks inflation.

This is much worse. Because when the cost of things goes higher because of tariffs, arguing it reduces consumption therefore it balances is simply not telling the full truth. The reduced purchasing power mean inflation is not shooting up. Shooting inflation is what we experienced but it also came down. This one will slowly creep up, but will not come down, even if tariffs are reversed.

I never thought I will pray for idiot politicians, because these very smart people are more dangerous than them. They know they are lying and they are very transactional about it. Their philosophy seems to be there is no such thing as right or wrong in politics, whether we achieved our objective or not.

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So by that rational, if eggs are $10 a dozen, AND we pay people less money, we actually have deflation?

God help us. I am so glad I a have moved a chunk to cash.

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Not exactly. Typically inflation will be accompanied by pay raise, to offset inflation. What he is saying is, we don’t have to increase salary, or like Biden administration did write cheque. Then they earn what they earn, but the cost of essentials goes up and either they consume less (hey we can reduce obesity :frowning: ) or they reduce consumption on discretionary, non-essential things (for ex: instead of every 45 days or 60 days you will cut your hair once 90 days). But for the economy it doesn’t matter, on the whole we don’t raise inflation.

This is double whammy on low income people. While price of their essential stuff goes up, to compensate salary raise will not happen and their lifestyle will erode, but slowly, so they can adjust to it.

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You are conflating. Inflation can exist irrespective of any increase in pay. One might hope that on the micro or macro level that incomes will increase to offset inflation but there is no guarantee of that.

Biden didn’t do that. Trump did. Covid happened in 2020 and much of the massive amount of Covid money was approved and sent out in 2020. Biden didn’t take office until 2021.

The CARES Act, passed in 2020 and signed by Trump, had a cost of just under $2T.
Families First, also passed 2020 and signed by Trump, had a cost of $225B.
Payment Protection, also passed in 2020 and signed by Trump had a cost of $355B.
Lastly, Response and Relief was signed and passed in December of 2020 and signed by Trump in December. It had a cost of $915B.

Ya, and it is completely false. Inflation doesn’t care whether or not you can afford to buy the same goods and services. If goods and services are more expensive, then we have inflation. If the cost of a Starbucks coffee is $1 more expensive and I now get my coffee at Speedway (and Speedway also increased their prices, but not by as much), then inflation still occurred. You appear to be suggesting otherwise.

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Let us get some basic facts… It is democratic congressmen, AOC, Andrew Yang, Tulsi (then Dem), Ro Khanna who were instrumental with the idea of direct payments during COVID. The stimulus package was championed by Democrats. Let us not forget Trump administration was not in favor to begin with. Even the second stimulus package he was forced to sign by Republicans, not something he wanted to do it.

Now, During Trump administration a total of (1200+600) were paid, and 1400 paid during Biden administration. So your assertion that massive amount was during Trump is wrong.

Republicans never owned the direct payment, they blamed the inflation is caused by those payments and blamed democrats are responsible for it.

<< Inflation can exist irrespective of any increase in pay. >> Again, read closely what I said. Typically pay raise accompanies inflation. The incoming secretary argues as long as pay doesn’t increase, the price raise will not increase inflation because it will reduce the consumption. Inflation is not measured just based on the price raise of one item, but a composite measure. IF people don’t have money to spend on discretionary items and demand dies, supply will adjust the price or it will collapse. In any case, as a whole inflation will be same. These are bit nuanced arguments. It is easy to be lost.

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Ya, and they be can just as easily absolutely incorrect.

But don’t take my word for it. Here is the Fed on this very topic.

PCE, the fed preferred measure of inflation,

To quote:

In Figure 3, we replicate our analysis for core PCE goods inflation (Panel a) and core PCE services inflation (Panel b) and find similar results. Early on in the pandemic, abnormal goods price shocks drove inflation; more recently (and to a lesser extent), abnormal service price shocks have been driving inflation. We find that in the second and third quarters of 2023, inflation dynamics were consistent with large disinflationary shocks in the goods sector and no significant inflationary shocks in services. Importantly, abnormal shocks are not needed to account for post-pandemic wage growth in either the service sector or goods sector. Wage growth has just followed the dynamics triggered by the initial shocks.

Our empirical model implies that wage growth shocks accounted for less than 15 percent of inflation at the peak of the current inflationary episode, 2022:Q1, a result consistent with the findings of Blanchard and Bernanke (2023).6 To test whether this relatively small contribution of wage growth shocks to inflation is a mechanical feature of the data or our empirical method, we used the same method to analyze the 1970s inflation episode and found that, unlike with the recent inflation surge, wage growth shocks primarily drove inflation during that period.

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What exactly is your point?