E Incoming Choppers: Inflation, Not Deflation, Will Surprise You

Anyways, only a handful of older individuals even watch the CPI (or as they remember it, the annual inflation rate) these days. Millennials have never even heard of the word 'inflation' outside of their high school economics class, nor have ever had to worry about it.

"Back in my day . . ." the older investors begin to lecture the younger investors about inflation and why they should care. The Baby-Boomer generation (born directly post WWII) spent their young adult lives in the 1970's watching soaring gasoline, food, and rent prices. But their parents, today's millennials' grandparents, during the Great Depression and pre-war years (late 1920's to mid-40's) had falling prices.  Being unemployed with a falling cost of living sure beats the hell out of being unemployed with a rising cost of living.

Today's young adults  have never had to worry about two issues: inflation and interest on capital. This is not the same kind of interest that many millennials are used to. The kind that they watch compounding on their student debts, and no matter how much they pay, it feels more and everlasting. No, interest on capital is something of pre-2007. Anyone born after 1990 has never noticed anything from the "accumulated interest" statement on their savings account balance.

But today's youth are tomorrow's leaders. And as far as they're concerned, it is the New 'New' Age. This is the awkward period of history that future historians will gawk at. It is an age of stabilization in the stock markets, where the Central Banks act as a backstop. It is an age of zero-percent interest, fueling historic debt levels across multiple sectors. And it is an age of deflation and anemic growth, where Central Bankers will do anything to get their growth and inflation. Ideas that were once so appalling, they couldn't have even be written in economic texts, such as negative interest rates and quantitative easing. The central bankers are now literally opting to begin 'Helicopter Money', which is fiscal and monetary easing. Simply, this is where governments will give big tax breaks/refunds to citizens while engaging in big infrastructure projects, as the central banks monetize it i.e. pay for it. The treasuries will issue bonds to pay for all this, and the central banks will conjure paper dollars to give them in return for those meaningless bonds. 

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Gary Anderson 3 years ago Contributor's comment

Nice article, except that real #HelicopterMoney won't need treasury bonds, which are already in short supply as collateral for derivatives. Real helicopter money would just involve base money, even if Bernanke and others don't quite want to face that kind of real helicopter money.