Economist: Inflation in 2018
A few weeks ago I had written an article entitled “Donald Trump Is Going to Print A Lot of Money” (https://steemit.com/life/@bretjfeller/donald-trump-is-going-to-print-a-lot-of-money)
In that article I had explained that money printing, in order to fund infrastructure projects and stimulate the economy, was going to put pressure on the dollar and create inflation. Since that time, many economists and traders have come out and forecasted more inflation in 2018 backing up my forecast.
The first is Danielle DiMartino. She has had a very long career in banking and worked underneath Richard Fisher, CEO at the Federal Reserve Bank of Dallas.
On the first of January Greg Hunter interviewed Mrs. DiMartino. The following were some of her most notable comments.
DiMartino says that a March rate hike is a sure thing, however she is not confident that the Fed will hike interest rates three times as they have forecasted that they will.
When commenting on the Federal Reserve’s plant to reduce the size of its balance sheet, she said:
“Before the Fed committed to unwinding its balance sheet, it owned 33% of all mortgages in the United States of America. You cannot tell me that when the holder of a third of all US mortgages begins to let them go, and steps back as >being the ultimate buyer, …that it’s not going to make the price of that item go down.”
When asked, when the Federal Reserve can normalize its balance sheet. Daniella said that: “I will be pushing up daisies”
While talking about pensions, she stated that we will have “an elderly poverty issue.”
Her comment until this point sounded deflationary, however she noted the increased producer price index (which is at a 6 year high) and called this the mother of all margin squeezes. She notes prices of packaging, lumber, plastic, rental prices and college tuition as proof of inflation. She believes we will have inflation and deflation at the same time and cited the increasing amount of automation and the replacement of human labor as evidence of deflation.
Gregory Mannarino, a very outspoken former trader at Bear Stearns, says that the theme for 2018 is inflation and that the dollar will remain under pressure.
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@bretjfeller an argument can be made that low inflation is structural and will remain low unless we see a pickup in wage growth around the world. Corporate margins and profits are at an all time high but that's not translating into wages. There's still underemployment and you also have e-commerce squeezing retail prices. Add to that automation taking people out of the workforce and just maybe inflation stays at an acceptable level.
I agree with you though. I think there will be a pick up in inflation this year but from a pretty low base. And with at least 3 interest rate hikes from the Federal Reserve inflation should be contained in the short to medium term.
Its too early yet to know weather the next crisis will be deflationary or inflationary. But very interesting that the Fed is so optimistic despite the fact that they can't hit their inflation targets. That is if you believe their "core inflation."
I'm more worried about them normalizing policy to quickly thus triggering an increase in interest and borrowing costs. I think that's where the next economic recession will come from plus, let's face it, the Fed always does this shit! :)