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Central Banks Have Become Irrelevant (The Market, 11 min read) Scottish market strategist Russel Napier saw disinflation as the dominant theme for the past two decades but now warns investors to prepare for inflation rates of 4% and more. He alludes to rapidly growing broad money aggregates (23% in the US) and control of money supply shifting from central banks to politicians (who would need inflation to get rid of high debt levels) as the main factors. [Bullish Inflation]
If We Can Print Our Own Money Why Do We Have to Pay Taxes? (A Wealth of Common Sense, 4 min read) The former chief economist on the US Senate Budget Committee, Stephanie Kelton, underlines four reasons in her new book, The Deficit Myth: 1. If people did not earn money to pay taxes, who would carry out essential jobs or how would the government find them? 2. For wealth and income distribution purposes. 3. To discourage specific behaviours (i.e. carbon and cigarette taxes). 4. Inflation could return.
The Fed Has Better Tools Than Yield Curve Control (PIIE, 5 min read) David Wilcox believes ‘there is a better way for the Fed to use its balance-sheet capacity… it should commit to holding the overnight rate at zero at least until inflation is as high as the Fed’s 2% target and the labour market has returned to full employment. It should also commit to purchasing longer-term securities until a similar set of thresholds has been met.’ This approach would clarify the Fed’s commitment, unlike YCC.
Weighting Bias and Inflation in the Time of Covid-19: Evidence from Swiss Transaction Data (Vox EU, 10 min read) COVID inflation might have been higher during the lockdown than suggested by CPI inflation in Switzerland. Utilising high-frequency and alternative data sources (i.e. debit card transactions) on both prices and consumer spending might be a better indicator of inflation. This is mainly because CPI basket weights fail to capture sudden changes in consumer expenditure and hence introduce bias. [Bullish Inflation]