S&P 500 posts 70th record close, Dow rises for sixth straight day

Started by OZER, Dec 29, 2021, 10:57 PM

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 world  Governmental debt and out of control money printingThis article is flawed inflation is caused in a large part by excessive money printing. They did not even mention this among the causes that have led to this wave of inflation. In fact there are multiple causes of inflation that are all made worse by the national

They're talking about run-of-the-mill inflation driven by wage-price spirals, and saying that's how you get an inflationary spiral. In my mind, that's not the only way. We have a fiat currency and it's value is really derived from people's faith in it's value. You can print money and encourage borrowing etc, but much like stock market bubbles, there is a tipping point in there when all the feedbacks turn from negative to positive.  Normally, you hold money, it holds it's value, there's no real push to gain or spend it. If you think inflation is going to increase, it now becomes a hot potato that you want to spend as soon as you get it. You do this by buying useful assets like houses, land, food, things you need. When everyone does this it drives up the price, which would normally dampen demand, but if the expectation that money will continue losing value and the price will only increase, then the price doesn't matter anymore. Sellers can ask arbitrarily high prices. But who's going to sell into this and accept that money? Thus supply goes down at the same time demand goes up, further exacerbating the situation.  The government has been pumping new money into the economy to try and stimulate it, yet velocity stays low. Who needs to spend all that money under normal circumstances? But what happens when it all starts losing value? All that "cold" money suddenly turns hot, and the *effective* money supply suddenly increases. Meanwhile, everyone is also incentivized to borrow as much as possible to "short" the currency, further increasing the supply. But who wants to lend into this? The credit market slows, and the government steps in as "lender of last resort" again....using printed money.  Meanwhile, the massive amounts of money tied up in the stock market suddenly need a new home. I mean, who wants to hold a stock when all you can get out of it is increasingly worthless money. You paper gains are impressive, but it's only a reflection of the fact your asset is losing value, because the only value it has is denominated in dollars (rather than any kind of tangible use).  I mean it goes on and on. Wage-price spirals may be a part of 'normal' inflation but they don't really play into hyperinflation.