336: We’ve Had High Inflation for YEARS and Didn’t Know it

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Manage episode 342815915 series 2516746
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I guess by now you've heard—we’ve got some inflation problems in the United States and globally and Central Banks are going to continue to ratchet up interest rates in attempts to reverse the tide. But wait a second. Why inflation now? Didn’t we print billions of dollars over the last 15 years or so? Why didn’t we have inflation then? Well, we kind of did actually. We’ve had historically low interest rates and quantitative easing since 2008. This kind of “money printing”, however, does not really benefit the common man. Low interest rates don’t make bananas cost more. But they do make stocks, real estate, and other assets soar in price. Ahh…so that’s where all the money went. Well, let’s not pretend we as investors did not benefit from this asset class inflation. We did. And of course, banks and institutional money benefitted even more. But again…the common man did not benefit from the usual money printing methodology. Arguably they weren’t hurt too much either. But they are getting hurt now because inflation has drifted from the markets to the price of food and energy. Certainly, there are a number of reasons for this. But, there is one precipitating factor that I believe began the process of shifting inflation to the main street. Before the pandemic, NONE of the efforts by the Fed or fiscal policy put money DIRECTLY into the hands of people who spend it. Of course, that all changed when businesses shut down and the government sent everyone money via parachute. Now don’t get me wrong. I know we needed to do that. People had to put food on the table. But I do believe that this is where the shift of inflation to the consumer began. Then you layer on screwed up supply chains and high demand for everyday stuff and of course you’re going to have high inflation. And now the Fed is raising interest rates with a vengeance to try to snuff it out. Will it? A recession and high unemployment probably will. But we have high wages, very low unemployment and continued supply issues. Raising rates doesn’t seem like it would help with those problems. Anyway, I’m no expert on interest rates and inflation but my guest on Wealth Formula Podcast this week is. He’s written a book on it. Make sure to listen to the show and try to figure out how you might potentially benefit from the economy today.

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