Cents and Sensibility: the Inflation Guy Podcast

Ep. 114: Why Interest Rates Don't Matter for Inflation

One of the absolute rock-solid articles of faith in the economics community is the proposition that increasing interest rates causes inflation to decline. If you want to slow inflation by a lot, you need to increase interest rates a lot. There is no question that increasing interest rates slows economic growth, and hurts people by doing so. The only reason to do it is because economists believe strongly that it brings down inflation.

But what if it doesn't? In this podcast, the Inflation Guy argues that neither logic nor empirical observations support the notion that increasing interest rates - especially in the absence of restricted money growth - causes inflation to decline. And the basic reason that this relationship is indeterminate is easy to understand. The IG explains.

NOTES

Last Week’s Great Podcast! Ep. 113: Real-World Crypto Escapades, Concerns, Threats, and Promises

Chart of Interest Rates vs Inflation: https://bit.ly/4eJTZly  

Blog for this month’s CPI: Inflation Guy’s CPI Summary (May 2024)

Important article: “The Inflation Management Opportunities In The Insurance Industry Today”

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 113: Real-World Crypto Escapades, Concerns, Threats, and Promises

On this episode of Cents and Sensibility, the Inflation Guy is blessed with not one but two outstanding guests, who help him unravel the significance of a recent client's problem: after selling his bitcoin on an exchange, the exchange made it difficult (so far, impossible) to transfer the proceeds back to his bank. As the Inflation Guy notes, "that's not in the marketing literature about crypto." So, he enlisted some experts to help explain what is going on, and what it means.

Andy Fately, last heard from in Episode 66 of this podcast, is a veteran of more than 40 years in the foreign exchange markets, trading spot, forwards and options as well as running businesses for major US and international commercial and investment banks.  He is known as the FX Poet (https://fxpoetry.com/about-2/), but really focused on creating solutions for risk managers for problems as they arise.

Susan Joseph, new to the program, is the Executive Director of FinTech at Cornell, and also engages as Fractional GC and Consultant, advising on crypto and digital assets strategy and its interaction with the regulatory world with a focus on the technical and legal interactions. Susan also educates through continuing legal education classes on blockchain, crypto, digital assets, and AI at Cornell, MIT, Stanford, PLI, and ABA and is a recognized expert. She has served as Secretary for both insurer and fintech boards, is an Advisor to certain crypto and other startups, and is the pro bono Executive Director of Diversity in Blockchain, a 501(c)(3) that supports inclusion.

 

NOTES

FX Poet: https://fxpoetry.com/about-2/

Article “Central Bank Digital Currencies: Some Considerations,” by Andrew Fately and Susan Joseph, on Tabb Forum (free registration).

Article “How CBDC’s May Impact Inflation,” by Michael Ashton, Andrew Fately, and Susan Joseph, on Tabb Forum (free registration).

Article “Dirty Laundry” on DW Birch Substack

Blog for this month’s CPI: Inflation Guy’s CPI Summary (May 2024)

Important article: “The Inflation Management Opportunities In The Insurance Industry Today”

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 112: This Month's CPI Report - A Very 'Goods' Thing

This month's CPI was a good number - happy news!

But if the Inflation Guy was going to design a 'good number' from scratch, he wouldn't make it look like this. He would start at the other end. What does that mean? Take a listen, and find out why this is a good report and a 'goods' report, but maybe not a great report.

 

NOTES

Blog for this month’s CPI: Inflation Guy’s CPI Summary (May 2024)

Important article: “The Inflation Management Opportunities In The Insurance Industry Today”

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 111: Until the Job is Almost Done

At the 2023 Fed conference at Jackson Hole, Chairman Powell promised that the Fed would keep fighting inflation "until the job is done." Is the job done? The Inflation Guy thinks the signs suggest inflation is converging on a higher level than the Fed desires. Will the Fed really keep after it? Listen and find out what the Inflation Guy thinks.

NOTES

Pod Callback: Ep. 109: Famous Last Words

Powell snippet: Source Bloomberg TV

Odd reference: Wikipedia on Mummenschanz

Blog for this month’s CPI: Inflation Guy’s CPI Summary (April 2024)

Important article: “The Inflation Management Opportunities In The Insurance Industry Today”

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 110: This Month's CPI Report - 'As Expected' Doesn't Mean 'All Clear'

The economists were mostly on-target with today's CPI report, at least with the headline and core figures. But that doesn't mean that there was nothing going on underneath the surface. Below the big headlines, some things are getting better and some things...aren't. What does it all mean, and does the Fed have some cover to cut rates? Listen to this episode to hear the Inflation Guy's take on those questions!

 

NOTES

Blog for this month’s CPI: Inflation Guy’s CPI Summary (April 2024)

Important article: “The Inflation Management Opportunities In The Insurance Industry Today”

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 109: Famous Last Words

"They couldn't hit an elephant at this distance!"

- General John Sedgewick, Union, US Civil War, moments before he was struck by a bullet in the eye.

The tradition of 'famous last words' is alive and well, especially at the Federal Reserve and Treasury. From Bernanke saying the subprime crisis would be contained, to Yellen and Powell describing inflation as 'transitory,' and far beyond - the track record of overly-confident predictions that ultimately turn out to be hilariously wrong is alive and well. In this episode, the Inflation Guy discusses the most-recent candidate, from last week...

NOTES

Blog Callback: “You Cannot Inflate the Debt Away”

Important article: “The Inflation Management Opportunities In The Insurance Industry Today”

Blog for last month’s CPI: Inflation Guy’s CPI Summary (March 2024)

Interesting Interactive CPI Chart the IG Didn't Even Mention But is Worth Looking At

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 108: Revisiting Velocity - Myths and Reality

There are several pernicious myths about the velocity of money that seem to never die. "Friedman said velocity is stable." "Velocity is just a plug number, so it is random." "Velocity is permanently impaired and only declines over time." These drive the Inflation Guy bananas, and from time to time he feels the need to talk about velocity. In this episode, the IG describes the main inputs into his model of velocity, and what the model currently implies about the future path of velocity from here. And, to be fair, he also kvetches some, and that's unseemly. We apologize for him.

NOTES

Blog Callback: “Enough With Interest Rates Already”

Podcast Callback: “Ep. 50: What the Money Velocity Comeback Means for Inflation, and Investors”

Important article: “The Inflation Management Opportunities In The Insurance Industry Today”

Blog for this month’s CPI: Inflation Guy’s CPI Summary (March 2024)

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 107: Those Ten Dangerous Words

We don't know if the origin of the 'ten most dangerous words in the English language' was Ronald Reagan, or if the story predates him. But those words, "I'm from the government, and I'm here to help you," are the theme to today's podcast. The Inflation Guy interprets some recent news stories, but ties it all together with a crucial observation about what happens if the 'scarce resource' in a particular economy turns out to not be 'labor.'

NOTES

Dan Bongino Show from April 18 (https://megaphone.link/WWO9433765103 ). Listen from the 47 minute mark.

Forbes “Medical Analysis by Milton Friedman” (2009)

Washington Post “Biden administration to cap rent increases for some affordable housing units”

Blog Callback: “Inflation and Insurance Companies, with Bill Poutsiaka”

Important article: “The Inflation Management Opportunities In The Insurance Industry Today”

Blog for this month’s CPI: Inflation Guy’s CPI Summary (March 2024)

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 106: This Month's CPI Report - A Potential Pony Situation

On this month's CPI report, the Inflation Guy addresses yet another high-side surprise and discusses the details, along with how this fits into the continuing narrative. Curious about how this concerns ponies? You'll have to listen to the episode!

 

NOTES

Blog for this month’s CPI: Inflation Guy’s CPI Summary (March 2024)

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/

Ep. 105: Inflation as Foreign Exchange, or How People Screwed Up Housing Forecasts

Okay, buckle up because the Inflation Guy here is going to cover some big-time concepts. Wayyyy back in 2003, some guys named Jarrow and Yildirim explained how inflation acts just like foreign exchange, except not foreign and not on an exchange. No, no, stay with me here. Turns out they were right, and a lot of what is happening today - and the mistakes in interpretation that are being made - can be understood if you understand that the 'inflation FX market' has just changed in important ways. This is an important episode!

 

NOTES

Jarrow R, Yildirim Y (2003) Pricing treasury inflation protected securities and related derivatives using an HJM model. Journal of Financial and Quantitative Analysis 38(2):337–359. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=585828

Unidad de Fomento (Wikipedia entry): https://en.wikipedia.org/wiki/Unidad_de_Fomento

Chart: Nominal and inflation-adjusted Case-Shiller 10-City index, normalized to end of 2019

Chart: Nominal and Real S&P 500 Earnings, normalized to end of 2019

To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/

To Subscribe for free to the blog: https://inflationguy.blog/

Check out the website! https://www.EnduringInvestments.com/