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I found this article very interesting on future inflation and Mr. Goodhart. Makes me come back to the TIPS article from February. Series I bonds > Short Dated TIPS > Long Dated TIPS. Somewhere in there Real Estate has to prove its worth but need to see price action support that. Tricky, tricky, tricky.
Inflation-expectations at FRED. One problem is that the headline inflation (CPI or PCE) doesn't include that from food, energy and housing. So, we are OK if we don't eat, don't drive and live in the woods (-:). https://fred.stlouisfed.org/graph/?g=MKu6
“He argued that the low inflation since the 1990s wasn’t so much the result of astute central-bank policies, but rather the addition of hundreds of millions of inexpensive Chinese and Eastern European workers to the globalized economy, a demographic dividend that pushed down wages and the prices of products they exported to rich countries. Together with new female workers and the large baby-boomer generation, the labor force supplying advanced economies more than doubled between 1991 and 2018. Now, he said, the working-age population has started shrinking across advanced economies for the first time since World War II, and birthrates have declined as well. China’s working-age population is expected to shrink by almost one-fifth over the next 30 years.”
Hard to argue with the above.
I lived through the sharp inflation of the 70s and beyond ... I recall the steep increases in gold prices & commodities that were an early prelude to the actual cost distress later felt by everyday consumers. Remember paying 15% for a fixed-rate mortgage. And recall hearing the initial announcement of Nixon’s institution of wage / price controls under the Economic Stabilization Act over the car radio in 1970 en route to my first good paying job somewhere in the southern part of Michigan.
One early lesson involved running out “with the crowd” in the late 70s and buying a few gold K-grands at $875 per ounce … and than watching their value slowly fall by more than 50% over the next 5-10 years. Inflation continued upward of course, but some of the “hot” assets that rose at first actually lost value towards the end of the hysteria. “To the early bird goes the worm.”
I really think the best approach is a well rounded diversified portfolio. Sure, I’ve tilted slightly in the direction of metals and away from fixed income. Might provide a slight edge if the predictions of worsening inflation come to fruition. But, be careful. Most likely by the time you and I decide something is a “good inflation hedge” a lot of the money has already been made by those “in the know” and having the power to move markets.
PS - In my humble opinion, it’s not too late to own gold, although it’s correcting today. But, it was a better buy two months ago.
From the same WSJ Article. Photo of economist and former U.K. central banker Charles Goodhart who in March 2020 predicted inflation of 5-10% post pandemic.
His theories seem to be well grounded in what's actually going on in the real world, and I respect his efforts to anticipate what's going on, but unfortunately in this arena there's just so many unforeseen variables that I don't think that any economist can be totally accurate. The Economist seems to think well of him, also.
In any case I admire anyone with the guts to wear socks like those! My wife wouldn't let me out the front door.
His theories seem to be well grounded in what's actually going on in the real world, and I respect his efforts to anticipate what's going on, but unfortunately in this arena there's just so many unforeseen variables that I don't think that any economist can be totally accurate. The Economist seems to think well of him, also.
In any case I admire anyone with the guts to wear socks like those! My wife wouldn't let me out the front door.
Yes, well reputed. Very nice write up in the Journal. Wish my work space looked half that organized. Got some damned tax documents floating around here somewhere …
Comments
https://fred.stlouisfed.org/graph/?g=MKu6
“He argued that the low inflation since the 1990s wasn’t so much the result of astute central-bank policies, but rather the addition of hundreds of millions of inexpensive Chinese and Eastern European workers to the globalized economy, a demographic dividend that pushed down wages and the prices of products they exported to rich countries. Together with new female workers and the large baby-boomer generation, the labor force supplying advanced economies more than doubled between 1991 and 2018. Now, he said, the working-age population has started shrinking across advanced economies for the first time since World War II, and birthrates have declined as well. China’s working-age population is expected to shrink by almost one-fifth over the next 30 years.”
Hard to argue with the above.
I lived through the sharp inflation of the 70s and beyond ... I recall the steep increases in gold prices & commodities that were an early prelude to the actual cost distress later felt by everyday consumers. Remember paying 15% for a fixed-rate mortgage. And recall hearing the initial announcement of Nixon’s institution of wage / price controls under the Economic Stabilization Act over the car radio in 1970 en route to my first good paying job somewhere in the southern part of Michigan.
One early lesson involved running out “with the crowd” in the late 70s and buying a few gold K-grands at $875 per ounce … and than watching their value slowly fall by more than 50% over the next 5-10 years.
I really think the best approach is a well rounded diversified portfolio. Sure, I’ve tilted slightly in the direction of metals and away from fixed income. Might provide a slight edge if the predictions of worsening inflation come to fruition. But, be careful. Most likely by the time you and I decide something is a “good inflation hedge” a lot of the money has already been made by those “in the know” and having the power to move markets.
PS - In my humble opinion, it’s not too late to own gold, although it’s correcting today. But, it was a better buy two months ago.
who in March 2020 predicted inflation of 5-10% post pandemic.
Looks believable to me.
In any case I admire anyone with the guts to wear socks like those! My wife wouldn't let me out the front door.