The case for why inflation is now entrenched and going to get worse has numerous points behind it. The US government has an out-of-control spending mindset that is guaranteeing $2 trillion deficits – minimum – for the next decade.
Federal interest expenses are already at $1 trillion and climbing with no signs of abating.
Wages are being renegotiated higher across multiple sectors. Oil is now up a whopping 37% since its July lows (and likely heading higher due to Russian and Saudi Arabia production cuts).
Any Covid shutdowns or sickness-related outages are going to keep up various supply-side shortages and related cost increases.
The only possible thing that could weigh this down is a recession really biting into demand. But we only have hints of that so far. I suppose there’s also the possibility of the resumption of student loan payments biting a bit.
Adding to all of this is the reduction of US Treasury purchases by China, Japan, and Saudi Arabia. Absent some mysterious foreign demand (I do wish we could get an audit of the Federal Reserve, by the way, to rule them out as the actual “foreign buyer” of last resort), the odds are that interest rates are going to continue higher.
These too will conspire against the Fed being able to meaningfully combat the next downturn when it arrives. This could get bumpy.
So the advice contained herein is to prepare for inflation and to protect your cash and portfolio reserves as best you can.
by caffeinatedengineer