Eoin Treacy's view -
So there’s plenty to choose from here and all seven are useful to hold in mind when thinking about inflation. For our part, we think an acceleration in inflation could now be driven by a combination of the following – the first two being critical to our case:
Monetarism – expecting persistent deficit financing causing the money stock (M2) to rise relative to GDP. Some would classify this as demand-pull inflation;
Marxism – believing that it will be impossible to re-impose austerity after the Coronavirus is over and that voters will demand rising real wages to control income inequality. Some would classify this as cost-push inflation;
Neoclassical effects – the just in time, Asia-dominated global supply chain is likely to morph into a just in case, home-grown supply chain, causing a large-scale supply-side disruption;
Environmental effects – on the basis the one should never let a good crisis go to waste, it’s likely that G7 governments now use their new-found balance sheet room to accelerate the capital investment required to make their economies ecologically sustainable, which will have the side effect of raising fixed capital costs for private sector firms.
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Some concern has been expressed this week at the impending expiry of the moratorium on evictions in the USA. This is a useful graphic.
It highlights the fact that many states have 30% delinquency on mortgages/rent. Interestingly, despite the widely held view that New York is on the cusp of being denuded of inhabitants, it is far from the worst in terms of delinquency.
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