The Inflation/Deflation Debate Wears On…

Our 30 year Treasury yield ‘Continuum’ chart indicates that deflation is the dominant trend, but…

Steve Saville has written a post that got me thinking about carts and horses and more precisely, which comes before which. Is the inflationary horse pulling the deflationary cart up hill or is the deflationary cart leading the horse to drink from the shrinking liquidity pool periodically?

See The Crisis-Monetisation Cycle

In conclusion to this short post Steve asserts…

“The crisis-monetisation cycle doesn’t end in deflation. The merest whiff of deflation just encourages central bankers and politicians to do more to boost prices. In fact, the occasional deflation scare is necessary to keep the cycle going. The cycle only ends when most voters see “inflation” as the biggest threat to their personal economic prospects.”

And over the course of decades now that is exactly the case. Every damn time that the public becomes terrified of declining asset (especially equity) prices the Fed springs into action.

On March 19, 2020 we asked…

A silly question on market sentiment… do you think pessimism is pervasive?

It was a question that needed no answer because the contents of the post showed casino patrons absolutely terrified of the deflationary event then in progress.

“Sentiment is aligned not over bearish, it’s not risk averse, but absolutely 100% terrified. And it’s one for the ages.”

On that same day we also noted that gold bugs had gone over the edge, emotionally…

Gold Stocks: Peak Bleak?

Fun times those were, and I am not joking about that. As a market manager and someone who writes about the markets please give me the kind of excitement that moves herds with extreme violence over the robo-trending (up or down) stuff that holds sway most often.

But I digress. That period was the last great deflationary knee jerk. On March 30, 2020 I posted an excerpt from NFTRH 596 (3.29.20)…

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