Reflation Nation

Everything is illuminated.

So illuminated that I can’t see a damn thing.

It’s the latest dive down the inflation rabbit hole. It may not be the last.

Things we think

The “why” of inflation matters just as much as the “what.” If you want to hedge against inflation or make money off it, it kind of depends on what you think is causing it. I mean, what is inflation anyway? Is it too much money or too little stuff . . . ? How can you tell? What if it’s all connected somehow . . . ?

Obviously, inflation is transient

The “back-to-normal transient theory” of inflation goes like this: the Wuhan Pneumonia caused supply shocks which caused scarcity which caused price increases. Once those supply shocks are resolved--because the labor force returns to work and/or international trade resumes--those prices will return to normal.¹

That theory makes sense, so far as it goes, and anecdotes check out. It implies that there are lots of people not working despite lots of work to be had, and lo and behold, that appears to be the case.…