INFLATION? WHAT INFLATION? – Pragmatic Capitalism

Here’s an interesting note via Bondsquawk:

“The yield differential between 10-Year Treasuries and 10-Year Treasury Inflation Protected Securities ended the day at 177 basis points.”

We are in the midst of a household deleveraging in which there is insufficient aggregate demand to generate price inflation or wage inflation. Although there have been countless predictions about the coming high inflation from government policies I still see no signs that there is high inflation on the horizon. QE simply doesn’t have a transmission mechanism by which it can create high inflation and the deficit spending is barely enough to offset the household deleveraging. This leaves the economy is a muddle through environment where we are likely to stagnate with low levels of inflation. So I have to ask what the fuss is about? Inflation? What inflation?

Cullen Roche

Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.

He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.