Could we soon see troublesome inflation?

Most Americans don’t know the pain inflation can inflict. We haven’t seen it in almost 4 decades. Could all the “stimulus” coming from Washington wake the sleeping tiger?

(From Reuters)

Inflation is being closely watched amid concerns from some quarters that President Joe Biden’s proposed $1.9 trillion COVID-19 recovery package could cause the economy to overheat.

The plan, being considered by the U.S. Congress, would be on top of a rescue package worth nearly $900 billion approved by the government in late December.

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In December the US saw a spike in personal incomes of + 10%. How this spike, and possible future spikes (from government money) impact things is currently not clear.

(From Zerohedge)

In January, this number (Personal Current Transfer Payments) was $5.781 trillion annualized, which was not only up by nearly $2 trillion from the $3.8 trillion in December it was also $2 trillion above the pre-Covid trend where transfer receipts were approximately $3.2 trillion.

This means that excluding the $2 trillion annualized surge in government transfers, personal income excluding government handouts actually declined by $22.3BN from $15.696TN to $15.673TN, hardly a sign of a healthy, reflating economy.

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In The UK there appears to be more, but still muted, concern.

(From The Guardian)

Adding to market jitters about the resurgence of price pressures as the global economy recovers from the Covid-19 pandemic, Andy Haldane said borrowing costs could need to go up sooner than the City expected to tame the inflationary threat.

Threadneedle Street’s chief economist – who has been the most optimistic of the nine members of the Bank’s rate-setting monetary policy committee – said the low-inflation era of the past few decades may be coming to an end.

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