To: DMaA who wrote (125633 ) 3/12/2019 4:37:31 PM From: RetiredNow 1 RecommendationRecommended By
Read Replies (1) | Respond to True, but right now inflation is very muted ( Inflation Rate ), which is one of the reasons Powell is able to pause on his hiking. In fact, I've taken a look at what happens when countries reach the 100% debt to GDP mark. It's not an absolute marker, but it is a good benchmark, because when countries get there, some weird stuff starts to happen in their economies. One of the perplexing things that happens is muted inflation. Japan has been experiencing this for a long time. It's a little ironic, because most people think in terms of massive deficits and debt causing inflation. But there comes an inflection point where the interest starts to crowd out both government and private spending, which causes monetary velocity to slow and commodities to settle at lower prices and capital investment to decrease. All of those things cause disinflation or sometimes outright deflation. Japan experienced this and they are the best forecast we have for the future of the US, because we're starting to see many of the same things and we're using the same remedies, which is to say, doing the same stupid things like money printing and ZIRP to NIRP. The banks are so over-capitalized that they essentially parked those excess reserves at the Fed to get interest. So that QE liquidity never made it to the economy to drive the inflation we all thought we'd see from QE. It's a foreseeable behavior, but has perplexed some people who were looking for inflation from QE.
