With a wave of populist infrastructure building via deficit spending, the Trump administration is driving up returns on 20 and 30 year bonds.
This is the same kind of populist spending that got the US into stagflation in the late 70's, will it happen again? Or do we know how to counter it now?
businessinsider.com
marketplace.org
OP here still,
Trade policy seems to be the linchpin. How that gets decided, one way or the other, could have a major impact on the likelihood of stagflation.
bump
nobody?
Why would you buy bonds now if there will be high inflation? Wouldn't it make more sense to buy gold and stocks like Visa?
You wouldn't want to buy bonds, that's why the yields are going up and the prices are going down.
Having your worth locked into an investment vehicle that is being inflated away is obviously a shit idea, hence why there is an ongoing "bond crash".
Right, I understand that. I'm trying to understand why OP said
> Should we park money in 30 year T-notes?
in his thread title
I think they're looking even more favorable, withe the upheaval of Brexit and a possible Italian shake-up. Europeans might want to start buying US T-notes before their bonds experience NEGATIVE interest from another sovereign debt crisis.
There's very little chance of stagflation now; it only happens when there's a supply shock. And right now with the unions weak, the wage share low, and oil not dominating the economy like it did in the 1970s, even that is unlikely to cause stagflation any time soon.
If all this deficit spending to fund infrastructure is actually implemented, the result will be economic revival.
Oil production, along with coal and gas, is about to ramp up under a Trump administration.
Infrastructure spending wasn't the cause of stagflation. Mainly, it was gov't pressure on the Fed to keep rates low so the gov't could fund some dumb ass war cheaply instead of raising rates to curb inflation, the end of Bretton Woods, and oil prices increasing (which affect everything).
>If all this deficit spending to fund infrastructure is actually implemented
Isn't Trump going to just give tax grants to entities that invest in infrastructure? I mean it's irrelevant to the conversation, but as far as I understand it, there aren't more expenses in the budget, just smaller income through lower taxes.
Isn't that yet to be decided? I don't think Trump has even contrived a budget yet, let alone released it.
We are facing another 2008, but I'd say 3x as big in terms of damage. Trump, if he's willing to be a hero and a martyr that we need, can give the US a tiny bit of medicine and let the economy crash slightly, get a "fever", ride the fever out normally and then true recovery can lead to an exploding, organic US economy.
A small crash to prevent the next real depression. He will go down in the ((corrected)) record books as being a poor economic president, when the exact opposite will be true.
If that doesn't happen, you should be selling homes during the next bubble and shorting the stock market sectors that are most reliant on or >outright funded by the government.
Mortgages are the only (major) asset that you are penalized for buying outright and incentivized for buying on debt.
Student loans are the only trillion dollar debt class that is SECURED BY THE GOVERNMENT.
Guess which country has the last 2 points, bubbling back up rapidly?
You guessed it. If you time this one well, you can make some money, because it is literally going to be 2008 x 3, just dont cut it too close.
Where to store your money right before.. well thats another post.. Lets all just hope Trump bleeds on the flag to keep it red.
Theres a ton of risk in the system but its spread over the globe.
I dont see a collapse, more of a slow decent over the next decade as every nation re balances its economy.
Letting the economy crash slightly is of no benefit whatsoever. Crashes don't prevent depressions, but they can cause them.
Fortunately, as Keynes showed, a government can get the country out of any depression just by increasing spending without a corresponding increase in taxes. There are some circumstances where doing so is too inflationary so governments opted for stagflation instead. But it's decades since inflation was a problem, and it's unlikely to be one again any time soon – though if Trump tries to implement his policies on tariffs, that will cease to be a safe assumption.
That is propaganda hogwash. Treasury rates are being driven up by the chinese unloading massive amounts of bonds, which is likely a prelude to the trade war chess they will be playing with the Trump administration. All the money coming out of treasuries has to go somewhere, hence the stock market is up. This is just a macro-economic version of the short squeeze.
>as Keynes showed
Stopped reading there.
>he feels the need to broadcast his ignorance
>I'm a slave to my disproved ideology
You are not supposed to use computers on the sabbath, Avi.
right now you should play materials and energy at least until Trump gets inaugurated
At some point in 2017/18 we'll see the effects of stagflation start to show and we'll get the inflation without the GDP growth, real rates will turn negative again and gold will start to work.
You pay attention to prices of things?
A bottle of soda has increased by over 40 cents since I left the US for a year.
That was only over a year. What does this mean? Im not sure, but why would the price of such a cheap good rise so much?
My bet is on inflation.
We know that the US inflation basket is crafted cleverly anyway.
I pay attention to the price of things around where I live.
They've mostly gone down due to more competition.
But I'm not in the USA.
Fascinating, where do you live?
South Australia.
The prices falling due to more competition was the direct result of ALDI opening some shops in my state.
>Should we park money in 30 year T-notes?
fuck no