The Inflation/Deflation Debate Wears On…

We anticipated a summer cool down well in advance as the yield approached 2.5%, and the indicator has been cooling ever since. There is still room to run for the current inflation cycle by this indicator. If the yield makes a right side shoulder that is somewhat symmetrical to the left side we could be looking at another upside (inflationary) ping of the limiting monthly EMAs 100  and 120.

But as to the premise of this post, the inflation/deflation debate, I’ll come down  on the side of deflation as the dominant trend against which policymakers are allowed – and even compelled – to work inflationary magic by manipulating debt to suit their agenda, as long as public confidence in the system is intact. I know that there are plenty of people not at all confident in the system (including myself), but Joe Sixpack knows or cares little about this. He cares about what he’s paying for consumer prices, including his sixer and the burgers and dogs on the grill.

We have witnessed panic points to the deflationary downside (e.g. 2008 & 2020) and inflationary halt points to the upside (e.g. 2011 and 2018). Today the Continuum is in a middle ground. If the inflation resumes as expected, the rise could be attended by a more Stagflationary backdrop than the relatively pleasant recovery out of the 2020 deflationary terror fest.

If the Continuum continues we’ll see yields halt at or about the red limiters before some future exploration of the deflationary downside once again as the current inflationary operation unwinds.

This long-term monthly chart is trending down and that is what I call the deflationary backbone against which the Fed has ever more cleverly learned to inflate the system. As of today confidence in that system is intact (Joe’s sixpack is still affordable). But forever? No way, and the direction it will be resolved is, in my opinion, likely to be deflationary because that is the multi-decade trend; down. Also, this system of Inflation on Demand could limp on for years, even decades more. We just don’t know.

View single page >> |

Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates and NFTRH+ chart and ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.