Treasury Secretary Janet Yellen acknowledged in an interview on Tuesday that she was “wrong” about “the path that inflation would take
This is right after meeting President Biden and Fed Chair Powell. Pretty much she owned up for being “wrong”, that means either she has to go (which I doubt), the other alternative is there is something coming from the Fed or administration.
May be Fed raises the interest rate out of cycle and higher or some other thing. or May be nothing.
In any case, I thought it is interesting statement. Separately, until Fed is done with raising interest rates and at least QT start, and we see inflation under some sort of control, buying doesn’t make sense. Yeah, I bought bunch of SPY calls last week. I change my opinion and these positions faster than my shirt.
This is right after meeting President Biden and Fed Chair Powell. Pretty much she owned up for being “wrong”, that means either she has to go (which I doubt), the other alternative is there is something coming from the Fed or administration.
Another alternative is that her statements back then were objectively wrong, and she’s just stating the obvious.
Everyone, even the GEICO caveman knows by now, FED, Sec of Treasury were/ are completely wrong with their transitory inflation story. There is no need for her to come out and say I was wrong. When they state something so obvious, voluntarily, you have to wonder, what is going on here. Like I said, I may be it is all nothing… but still hmmmm…
Another alternative is that her statements back then were objectively wrong, and she’s just stating the obvious.
I tend to cut 'em some slack.
People make mistakes, even very well informed ones, especially when circumstances are unusual.
There were lots of very good reasons to think the inflationary burst was temporary, and lots of good other very good reasons to think it might not be.
Somebody had to make a call.
I follow Divisia M4 as the best broad money metric. It’s no secret that a big expansion in the money supply will typically lead to some inflation, after a lag.
The shape of the curve is very consistent with a HUGE explosion in the money supply, then a near complete reversion to the prior slow growth rate.
The annualized 6, 12, and 18 month rates of increase in the money supply are now down to 2.8%, 3.4% and 4.3%: pretty tame.
In October 2020 those three figures were 18.0% 27.9% 21.0%. The money supply acceleration has faded.
This is one datum consistent with the notion that the inflationary burst could yet fade.
Or, at least, that it might have done so absent the spikes in oil, gas, edible oils and grains,
industrial ICs, and sundry goods from Shanghai, which have all happened for entirely non-monetary reasons.
So maybe they were the impetus to let inflation get a bit more entrenched, which it might (?) not otherwise have managed.
It feels to me the inflation is not going down.
I live in CT/new York suburb. The housing price here is just going through the roof. Although mortgage rate is up a lot recently, people are still buying. The other day a $6m house just gone pending. That house was sold for $4m last year. The buyers are people from NYC.
If you look at the S&P500, it’s up like 4x during the last 10 years. So people really got a lot of money to spend.
Just a note on monetary causes of inflation.
I mentioned last month:
I follow Divisia M4 as the best broad money metric. It’s no secret that a big expansion in the money supply will typically lead to some inflation, after a lag. The shape of the curve is very consistent with a HUGE explosion in the money supply, then a near complete reversion to the prior slow growth rate. The annualized 6, 12, and 18 month rates of increase in the money supply are now down to 2.8%, 3.4% and 4.3%: pretty tame. In October 2020 those three figures were 18.0% 27.9% 21.0%. The money supply acceleration has faded.
The 6- 12- and 18-month annualized rates of increase of the USD money supply are now 2.18% 2.28% 4.11%
Lower again.
The interesting question is whether the one-time (but ended) burst of money, plus some subsequent important product/specific huge price increases,
will have been enough to kick start a broader wage/price inflation regime.