Three Things I Think I Think – Housing Bubble 2.0, Passive Investing And Hyperinflation

  1. These are mostly producer prices, not consumer prices. It’s not uncommon to see large swings in PPI that doesn’t materialize into CPI. In fact, this happened from 2001-2008 during the big run-up in oil and commodity prices and the producer prices didn’t get passed on in large part because aggregate demand was weak and the huge price surge contributed to a price crash. As the old economic saying goes, sometimes the solution to high prices is high prices. In any case, the BLS actually talked about this in some detail back in 2012. It’s an interesting piece if you want to check it out.
  2. Further, there’s some cherry-picking going on here. The data picks the bottom of the price trough in many of these commodities to make it look like there’s been huge changes. But if you look at any 5-year chart (below) in the same commodities you’ll notice that prices are up only modestly. And this is important to understand because producers don’t make all of their products all at once. It’s a rolling process. So yes, some of the products were made in 2020 and some are being made as we speak. They’re incurring relative price increases across a rolling period. Some of those periods were relative price declines. The main point is, even if lumber prices are up 126% year over year, it’s clear that aggregate commodity prices aren’t up nearly as much as you might think when looking at longer time horizons.

Now, I am not saying that there’s no inflation. I’ve gone on a million podcasts in the last year saying inflation is here and coming. So yeah, could 2, 3, 4% inflation be coming? Of course. I’d be shocked if we didn’t get at least 2.5% during the Summer. But we don’t need to lose our minds and start talking about hyperinflation just because we really like Bitcoin.

That’s all I got for now. I hope everyone is staying safe and getting vaxxed. It feels like we might have a normal Summer after a pretty hellish year so here’s to hoping things don’t all come crashing down on us.

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Disclaimer: The content in this article is provided as general information only and should not be taken as investment advice. Article content shall not be construed as a recommendation ...

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