Welcome To The Hyperinflation Era. Did You Buy Bread Yet?

Welcome To The Hyperinflation Era. Did You Buy Bread Yet?

Welcome to the first day of the hyperinflation era in the US.

I’m just kidding. But that’s the vibe you get when you peruse a few headlines and glance at cable news. Consumer prices rose the most in a decade in the US and folks are lined up at gas stations.

It’s not all base effects on the CPI front — obviously. But it is (mostly) pandemic distortions of one kind of another. After all, the crisis is to blame for quite a few of the bottlenecks bedeviling supply chains. And while extreme monetary policy is nothing new, the overt enabling of fiscal largesse is something market participants haven’t pondered before, at least not on this scale, and it wouldn’t be happening absent the pandemic. Have we erred and doomed ourselves to spiraling prices? Maybe. It wouldn’t be the first time we’ve screwed up as a society. And remember: Some of the policies “credited” with pushing up prices are designed to ameliorate previous screwups.

As for your gas tank, Colonial restarted the pipeline. That’s the good news. The bad news is “it will take several days for the product delivery supply chain to return to normal,” the company said, adding that “some markets may experience, or continue to experience, intermittent service interruptions during the start-up period.”

This too shall pass, I suppose. It’s all “transitory.” Or not.

“It was the kind of report, like Friday’s payrolls, that Make Data Great Again,” Rabobank’s Michael Every quipped, adopting a particularly energetic version of his already lively cadence. “[It] also shows the whole economic number forecasting business is a silly game when it really matters,” he went on to say, adding that, “you can tell me what a number will be when that number doesn’t change anything: you just can’t tell me what the number will be when it changes everything.”

Global equities weren’t in a McDonald’s kind of mood — they weren’t “lovin’ it.” The MSCI Asia Pacific Index fell into a correction, while the MSCI World was headed for its longest string of daily losses since September (figure below).

Losses in Asian shares were paced by tech and communication services.

The Stoxx 600 tech index was headed for a fourth consecutive daily decline, tracking for a weekly drop of more than 6% (it would eventually trim losses). The Hang Seng Tech gauge, which managed to rebound Wednesday after extending losses to some 30% from recent highs, dropped sharply again (figure below).

“Decades of actual price stability fostered by globalization and ever accommodative monetary policy fueled what is arguably the greatest bull market ever, to the point that it is a historic bubble,” JonesTrading’s Mike O’Rourke remarked. “The financial markets have likely entered a new regime that will result in a much more uncertain and uncomfortable investing environment.”

“Away from the headline-grabbing price increases, the persistent disinflation in many goods (computing, games, clothes) has been stopped, at least temporarily,” SocGen’s Kit Juckes wrote Thursday. “For years, the cost of making most of these goods has been so low that any demand-led price increase has met a supply response,” he added. “Is it different this time? It might not be in the long run, but it probably is for several more months.”

One person who isn’t concerned about a sudden surge in prices is Haruhiko Kuroda. Prices in Japan haven’t suddenly spiked, he said Thursday. The BOJ, he mused, isn’t worried about such an outcome in Japan. On that point, at least, most pundits would likely agree.

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