When it comes to the people I want to hear talk about today's economic world, Mohamed El-Erian is about the top of the list. He's a very intelligent, well established investor who tells it pretty much as it is. Right now, in this October 22, 2021 Bloomberg interview, he says the signs are telling him, inflation (rising prices) is heading up, and will keep going up for quite a while.
The Fed (the Federal Reserve, the non-government entity that is the U.S. central bank, and creates our money) has been saying this inflation is "transitory," for a few months, meaning they didn't think it would last long. But inflation has stuck around, and it's getting worse.
"Inflation is the number one issue facing investors."
- Paul Tudor Jones, another very smart, savy, established investor, in this October 20, 2021 interview on CNBC.
To calm inflation down, The Fed can raise interest rates that banks charge each other for short term loans. When they do that, all other interest rates go up as well, in a ripple effect. But that would mean the cheap, easy money that Wall Street has been relying on since September 2019 (Google "Repo Market Crisis"), is ending. And that would make stock prices drop, big time.
So The Fed is stuck, If they do nothing, inflation keeps getting higher, and most everything you buy keeps going up in price, maybe a little, maybe a lot. If The Fed "slams on the brakes" as El-Erian says in this interview, that means raising interest rates 1/4 % or 1/2 %, and stock prices react and go down. It looks like The Fed is going to let prices soar, and then raise interest rate too late (sometime next year, say March to August, most likely), and then stocks drop faster and harder. That's if they haven't tanked already for some other reason, like the fact they are crazy high to start with.
In any case, for normal, real world, working people, prices are going to keep going up, for many months, maybe a couple of years or more. Get used to it. Welcome to the (not so) Wonderful World of Inflation. And even better stagflation. That's a stagnant, lackluster economy, with rising prices at the same time.
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