Conversation

41) So what does all of this imply for the future? Well, on the one hand, inflation–true inflation–is high. Really high. High enough that it would generally be worrying. Does that mean markets will keep going up? Especially given that even CPI inflation is now high?

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42) Maybe. But maybe not. Because to some extent, that should already be priced in to “efficient” markets. As soon as the world realized what was going to happen to policy because of COVID, prices should have adjusted to the full increase that all future QE would bring.

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43) CPI increasing this year doesn’t make markets go up more: markets already knew that the monetary supply had increased, and didn’t have to wait for CPI to move.

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44) Instead, CPI increasing this year had the effect of increasing political pressure to reduce inflation by tightening monetary policy. So increased inflation indicators sometimes lead to decreased inflation, because of policy reactions.

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45) So I don’t know what this means going forward. On the one hand, there are real signs of tightening policy for the first time in a while. On the other hand, even the proposed rate hikes are a lot less than true inflation probably is, barely making a dent in real rates.

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46) And also, there’s a war going on now, on top of COVID; there will be pressure to prevent markets from crashing, which means, well, you know…

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47) So in the end–I don’t know what will happen going forward. I wish I were smart enough to see the future, rather than just the past. But I guess my main takeaways from MMT are: a) It probably lead to significant, serious inflation b) Also it probably prevented a recession

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48) Those are, sometimes, two sides of the same coin. And, also: c) QE → number go up → easy to get financing → number go up → easy to get financing → …

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49) We have, accidentally, been exploring Post-Modern Monetary Theory as a society. A system designed so that numbers mostly just go up and up and up, as they mean less and less and less.

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