Interesting article. Nice analysis. In most respects I'm in agreement, however I think Gave is wrong with respect to the ultimate effect Covid social spending. This is the only kind of spending that could have helped under the circumstances. Spending on infrastructure, as China did in recovering from the 2007-9 Financial Crisis, would not work here. What Gave is missing is that as the Pandemic Crisis passes the Central Bank (the U.S. Central Bank) will gradually withdraw the excess liquidity (money) it has added to the economy, either by raising taxes via increases in the number of top brackets and top marginal rates (hopefully) or via bond sales (less wise, less useful) . There will be an anticipated inflation and therefore dollars will be sold. There will be a pick up in inflation, but it will be muted by Central bank policy under Yellen, and those who anticipate runaway inflation and a plunge in the dollar, and invest accordingly, will be making a mistake and be proven wrong. After the crisis passes, the time for infrastructure investment will arrive. The Centrtal Bank and the Government will be in far steadier hands after Jan 20th.
Driving around yesterday and I hear on the radio that the Fed will not raise rates until we have at least 1 year at an average 2%. I had to laugh. I lived through rates as high as 21%. I was selling RE back then. Anyone that thinks that inflation, once it gets going, can be controlled on a short term basis is a fool.
I was among the many singing this same tune in 2008, even committed a decent part of my investing portfolio to the inflation thesis. Lost a bunch of money on that piece of my portfolio. I don't know that we won't have inflation now, but I do know that it's a fool's errand to try to predict it.
The thing to watch is nominal wage growth. Unfortunately the data is all screwed up now due to so many low-wage workers being fired - YoY comparisons likely won't be valid until the spring of 2022. If we get to mid-2022 and wage growth is clicking along at 4% or 5%, then the CPI isn't far behind. Could be the big theme of this decade.