I'm not sure if this really belongs in a topic thinking about inflation of the past, but given many of the folks who think inflation of the future will not look like that of the past, it seems like it is one of the general threats to ERE. This does not mean ERE resilience is broken, just the "Early Retirement" element could be under threat depending on future outcome and how bets are organized. I didn't cite everyone I have read or listened to, just a sample set to capture some of the broad ideas.
Inflation Camp:
This camp goes from those who think we are going to have mild inflation of 2-3% to a
crack up boom to hyperinflation. Their reasoning tends to be around things like M1/M2 measures that @Mister Imperceptible cites. How far out these predictions seems to vary, but in general I'd say most folks are not going much past the next year. Maybe Michael Burry's hyperinflation comments go a few years out, but that is not the typical analysis I see. My favorite of the stories in this camp is the idea that by moving manufacturing back to the US will cause costs to go up and thus inflation via resilience.
- Lyn Alden:
https://youtu.be/OEBBpB_XtDU?t=65
- Jeremy Siegel:
https://youtu.be/R2-lCKtky_0
- Russell Napier:
https://youtu.be/p044vfmVvoA
- Louis-Vincent Gave:
https://youtu.be/RSE6ui_eCNQ?t=985
"Bullishness" Those who seem to think things are more likely to end well for stock markets than not; be it only measured nominally or true recovery:
These folks seem to believe that the recession is over and we are about to enter into another bull run. Josh Brown does note mini-bubbles but doesn't believe it could harm the market as a whole. These folks don't seem to get the sense anything is really wrong.
- Jim Cramer:
https://www.youtube.com/watch?v=75seowYsc84
- Josh Brown:
https://www.youtube.com/watch?v=SPCUKQ0lxbU
Deflation Camp:
The deflation camp is the most complex of the camps. These folks vary in their thinking greatly into why deflation. One group believes the system of bonds, treasuries and central banks will be forcing interest rates lower (against the will of the market). This group's view is all about the financial plumbing of the system, but the best simplification is the "just like Japan" analogy. Another group believes that the 10% unemployed, housing forbearance, rent forbearance, etc will cause asset prices to drop whenever the government backs away from pumping the market up. Yet others point at debt destruction (e.g. Visa/Mastercard seeing debt disappear) as destroying money and thus stimmies are just a shift in balance sheet between gov't and private individuals. Since Visa charges greater interest compared to gov't debt, demand for dollars will drop. While less deflationary, one reason the US might get away with printing more without inflation is due to world-wide demand for dollars in order to handle the debt they have denominated in dollars, particularly when circulation of the dollar is down. Printing might extend and pretend in these other countries just long enough to make sure that we don't hit world-wide insolvency events, just creating smaller deflationary explosions in some sectors that don't get enough dollars to survive. This may make a future boom, but only after behaviors shift away from a conservative balance sheet (think how folks who lived in the great depression remained conservative in finance for the rest of their lives). Still another story is that we will use less stuff like flights, cars and gas thus lowering demand permanently. This would explain an asset bubble we're seeing at the same time demand for goods falls and thus deflation occurs. A final story is that tech will continue to push inflation down. This story can even be used as an example for why the inflation camp's resilient manufacturing story is wrong-automation will mean there are no/few wages in our on shore manufacturing and thus no inflation.
- David Rosenburg:
https://youtu.be/NwyR8dU_i7M?t=902
- Steve Van Metre:
https://www.youtube.com/watch?v=i85Y9VNQ-M8
- Cathie Wood:
https://youtu.be/dynmtlO2_3c?t=1329
- Mike Green?:
https://youtu.be/sjKU1ofV1nA?t=4241
"Bearishness" - Those who seem to think things are more likely to end badly than not; maybe stagflation, both nominal and real return down or maybe general deflation:
In some sense these folks just "smell" something wrong, be it a sense of a bubbly market, bitcoin craziness or bonds will push asset prices back down.
- Don Kaufman:
https://www.youtube.com/watch?v=cYU0yWUKR28 (Note he is a short term trader but he has been mostly bearish from March of last year)
- Jim Rogers:
https://youtu.be/txZpbZTzlyg?t=557
- Jeremy Grantham:
https://www.youtube.com/watch?v=RYfmRTyl56w
Both:
These folks think the plumbing will cycle between inflation and deflation. They solely point to plumbing.
- George Gammon:
https://www.youtube.com/watch?v=XAAdwhxzhE8
- Steve Van Metre: (He seems to believe eventually this will fall apart, but he doesn't give a sense that it is coming soon, so no link).
- Mike Green?: He sorta-kinda thinks it will be both in that he thinks passive investing has been causing the market rise and eventually due to some unforeseen or possibly demographic issue, the market will pop and passive will make the system completely crash. I don't think his predictions really enter into the wider economy regarding the overall outcome. See nearly any recent interview with Mike Green on this idea.
Thinking on measures of safety:
With this sort of variety of views, are their obvious defenses one can take up? It seems to me there are financial, currency/collectables, and skill based efforts you can take on.
I suppose one simple hedge is having a mortgage while having cash in bonds, so that if either inflation or deflation occur, you'll be well positioned. Another is to invest in unloved value plays not seeing big booms in the market, if you can find them. That way if inflation happens, you're at least partly covered and if deflation occurs your bet should be relatively uncorrelated.
Russia perhaps? Net-nets maybe? Another possible choice is to buy a straddle if you believe one or the other will happen in an extreme. That is roughly Mike Green's solution. Finally there are TIPS which could be used to hedge inflation.
Regarding currencies, since all currencies are seeing some level of printing, the obvious answers are either crypto or gold. Perhaps some currency will devalue relative to gold, bitcoin or whatever. Then the collectable element also makes sense since anything with scarcity can make sense. Think of rare art, fancy bottles or whine, etc. Even if things deflate, these objects should retain value relative to the purchasing power of the currency in the same way gold does. The problem in my opinion is that it is too late to get into this world as it seems very bubbly to me, but that is my own take.
An alternate route from the money side is the skill set of solutions. Skills that are both valuable and yet not capital intensive seem ideal in both inflation and deflation. If hyperinflation does show up at the same time crypto-currencies have a death penalty attached to them, online sales would seem difficult, so in person skill is better. Things like bicycle repair, music teacher or locksmith seem like good ideas. If crypto is left alone, then of course online based work seems equally likely to work out just as well as in person jobs.
The Alpha Strategy tries to solve for inflation, but if done strategically, it could be reasonable for deflation too. Granted you might lock in higher prices for things you need, but in the long run it won't matter much if you are going to use them and it might be a reasonable hedge anyway. Looking at
hyperinflationary periods, it seems most only last between a few months and a few years.
Summary & Open questions:
Wow, this went on long. I'm have been tempted to delete the entire thing, but kept it in case it is of value to some others. I know I skipped a bunch of folks from Harry Dent to Peter Schiff, but I tried to encapsulate their ideas in my summaries. Have I missed any major elements from both the ideas generated previously or the general analysis in the inflation/deflation debate seen in public? Once you throw in the idea that history maybe drastically different than our future, do the "End of Technologic History Thesis" and the "End of Personal History Thesis" requirements get violated by any of the above theses for inflation/deflation? What am I missing? I know level of inflation on a per-good and per-asset class basis is missed, but I think if we get that far down into the weeds this discussion would have exploded to insane proportions. Anything else I missed?