The Great Reflation 2021

Markets have rushed to price in higher inflation during the first quarter of 2021, in expectation of supercharged economic growth. To support this, they point to central bank and government largesse, as well as rising commodity prices and market expectations of inflation. But do market prices really support this narrative?

What Is Inflation Exactly? When Is It Good?

Prices of goods and services are rising ever higher - inflation!

Inflation is a much used word that somehow evades all attempts at precise definition.

A commonly used one is provided by Milton Friedman, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output”.

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Is Dr Copper Making A Fool Out Of Us?

It is said that Copper has a PhD in economics because of how widely used it is across the economy, but is it's price always a reliable indicator?

A favorite trick of global macro commentators, and some traders, is to look at short term price action in a particular market and from there extrapolate broader economic conditions, which they then use to make other forecasts.

Copper is a perfect example of this.

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Markets ≠ The Economy: Oil

Oil production on land with derricks and wells in the desert

Crude oil is another commodity that market participants like to look at in order to gauge the overall health of the global economy. The logic here is the same as with copper, since oil is what the modern industrialized economy runs on, a higher price per barrel must mean strong global growth… right?

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Can Money Run? Introducing Monetary Goldilocks

Inflation is also a function of money velocity, which is how oftern money changes hands in an economy

How fast can money run? Fast enough to destroy an economy. Paradoxically, also slow enough to destroy an economy.

But what exactly is money velocity?

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Breaking Down Breakeven Rates Part 1

Breakeven rates in the US have rebounded strongly from their COVID lows and markets are expecting boom times again

Breakeven rates are all the rage these days. The chart below has been posted (and printed) all over the place showing the huge rally in breakeven rates since the lows of March 2020. People are looking at this rally and using it as evidence that the US economy (and by extension the world’s) is on the verge of “boom times!”

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