The coronavirus crisis has killed hundreds of thousands, incapacitated millions and affected the livelihoods of billions — prompting policy makers to fear a deflation spiral reminiscent of the Great Depression. But economists including former Bank of England official Charles Goodhart, and investors such as BNP Paribas Asset Management, are asking if a different phenomenon lurks in the wreckage of global growth.
Muted Price Growth
IMF predictions for inflation rate at end of 2021
Yes, inflation rates are muted in the short-run, but the surge in government spending and The Fed balance sheet is scaring some people about “inevitable” hyperinflation.
And the surge in M2 Money Supply YoY is leading some to panic.
The COVID-19 virus sweeping the globe is having dramatic impact on asset and commodity prices. Particularly gold.
Contango, also sometimes called forwardation, is a situation where the futures price (or forward price) of a commodity is higher than the spot price of the contract today. Such is the case for gold futures where the futures price for gold exceeds the spot price.
A liquidity trap is a situation in which, “after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers holding cash rather than holding a debt which yields so low a rate of interest.”
Well, Buckaroos, we are in a liquidity trap with the 3 month Treasury yield at -0.025%.
A closer look at the T-bill market today.
So here we sit in a classic liquidity trap!
Fed Chair Jerome Powell in a liquidity trap!
Mega thanks to Jesse at Jesse’s Cafe Americain for the jail jpg.