Inflation SURGING in 2021. Time to Buy Real Estate?



The June 2021 CPI reading of +6.8% showed inflation at its highest levels in decades. Many are now concerned a repeat of 1970s style hyperinflation is on the way, especially with the Federal Reserve continuing their Quantitative Easing and Money Printing programs. Should investors be looking to buy real estate, Bitcoin, stocks, or gold as a hedge against this Inflation?

The price of goods (especially used cars, gas, and meat) across America has spiked over the last three months as a combination of economic re-opening, supply shortages, and low interest rates has pushed up inflation. The Bureau of Labor Statistics-tracked CPI is now measuring the highest YoY % increases in decades.

The Federal Reserve Quantitative Easing program gets a lot of blame for this inflation. QE is essentially a “Money Printing” strategy where the Fed gives banks cash in exchange for treasuries and mortgage backed securities. Analysis of bank balance sheets shows that their cash reserves have spiked as result.

But interestingly banks aren’t making as many new loans as they used to. The growth rate in loan credit from US commercial banks has slowed to only 4% per year in the last decade compared to well over 8% from 1970s-2000s. If banks aren’t making loans at the same rate, and the Fed printed money is just staying in bank vaults, that’s not inflationary.

Banks appear to be increasingly cautious in 2021. According to Jamie Dimon, the CEO of JP Morgan Chase, the company will hoard cash and wait for better investment opportunities into the future. This mentality of cash hoarding is a deflationary attitude, and it will be difficult for inflation to take off so long as banks are cautious.

The other issue is that the inflation measured so far does not appear to be broad-based. Used cars, meat, and energy are the main segments that have seen big price increases. But many other goods – such as clothes – have actually down in price.

On top of all of this US Treasury Yields have been crashing over the last four months, while the US Exchange rate against other currencies has remained stable. This indicates that institutional investors aren’t betting on long-term inflation in America.

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0:00 Hyperinflation: Here to Stay?
1:14 1950-2021: Historical Inflation Rates
3:45 What IS Inflation?
5:06 Cars, Gas, Energy = Biggest Increases
7:40 But Some Things are Cheaper!
9:16 No Broad-Based Inflation Here
10:27 FED Printing Money!
11:58 Banks are Hoarding Cash
13:52 Is QE Inflationary? or Deflationary?
15:29 Loan Growth is Going Down
17:58 JP Morgan = Stockpiling Cash
19:29 No Inflation: Bond & Currency Investors Agree
21:39 Real Estate / Bitcoin Hedge

#Inflation #Hyperinflation #Deflation

20 comments

  1. BMO thinks the same like you, inflation is only temporally, what will that to do with Real Estate. Here in Toronto people are paying for semidetached house 1.65M, it is just unbelievable. I'm waiting!

  2. Love the videos, but your definition of inflation is just wrong. Inflation is an increase in the monetary and/or credit supply. Changes in prices are one of the symptoms of inflation / deflation

  3. Your rresults are only has good as your data,and well you belive the numbers put out by the US government I got a few bridges to sell you.Data they post is changed weekly what they track for the consumer price index they pick what to could. FYI inflation is tomuch cash chasing to few goods.Tell you what get a list of what they say they are tracking go to your local store LOL it is kind of fun to see how much BS they are putting out.

  4. Darn, I keep wanting to watch your videos and keep hoping you won't over dramatize and exaggerate economic conditions simply for YouTube views but alas you cannot seem to help yourself. How many noticed the subtitle of the first segment? "Hyperinflation: Here to Stay?" Are you seriously suggesting we're in a state of Hyperinflation? If you are, then every economic point you make thereafter needs to simply be ignored as there is no such condition and you know it. Or do you? Or did you put that false inflammatory subtitle in for the views and clicks for your YouTube channel? Are you promoting data driven information as you claim, or are you selling fear for the clicks?

    I'm not your only viewer and most people will not notice such unwarranted hyperbola but I do and am searching for someone, anyone who will simply post accurate information for the viewer to consume. When I see 'plunge' or 'explode' to make a point about what might be a relatively small movement in the data it begins to show your colors. Being a YouTube channel I realize the ability to do what I suggest is near impossible because without the views and thumbs ups you do not make a living but what if you didn't post hyped and false information like the one above regarding Hyperinflation? Would you really have fewer viewers? Less thumbs ups?

    Well this one viewer would really appreciate the non-biased information instead of the over hyped info and would earn you at least one more thumbs up.

    And this in your intro, "Many are now concerned a repeat of 1970s style hyperinflation is on the way…." Making my point, because you also KNOW that we did not have hyper-inflation in the 70's, but wait it was "1970's style Hyperinflation." Come on man, you can do so much better.

    And furthermore after viewing the entire video none of the title nor intro text matches your excellent analysis. What's up with that? Why not have the title match your conclusion? Something like Inflation or Deflation? Buy Real Estate Now Or Wait? Instead you write "Inflation SURGING in 2021" with all CAPS for SURGING then go on to theorize with an excellent and educational analysis that monetary and bank policies may actually be deflationary? Do you see the disconnect you are creating with your titles and the content?

  5. I respectfully disagree with you on your main point, seeing as we are living in a time where everything we need and want is costing us more. Starting with the roof over our heads, rent has gotten crazy and there is a shortage of inventory, also a shortage of building supplies (which are now omitted from the data) so if you can't afford to rent, can't afford to offer $40,000 over asking price, and you can't afford to build, then you either live with family/friends, camp or live out of your car. Secondly biggest purchase we make is our cars, which you presented three current issues we are facing very well, although I don't think you brought up the element of how much the mechanics rates have inflated and the shortage of parts to make the repairs. Next essential is our food, which we are seeing all food prices soar and apparently we have already forgotten the empty shelves from last year, or we aren't considering the droughts that are affecting much of America's farm land, or the floods in China that caused them to buy up larger than normal amounts of the rest of the worlds soy, rice and wheat. Soy is a big one for livestock feed, so when that gets expensive so does our meat.

    I could go on and on, but I don't feel as confident as you about the inflation that we are in. That being said, I also hope you are right!

  6. Meat, Energy, transportation, these are necessary items for people at least during a once per century pandemic, compare to banana, clothing these things are less needed during a stay at home environment. In conclusion, average families are short on cash, only spending on things they really needed AKA SURVIVAL. Darker days are ahead. Great video as always!

  7. You didn’t say anything about all the stimulus money that has flooded the economy. Isn’t that contributing to inflation?

  8. How do you feel about the global inflationary pressures making their way into the US? QE from other central banks around the world are not being slowed down by US lenders.

  9. isn’t it the FED the ones keeping treasury rates low ? And you mentioned QE but nothing about artificially low interest rates?

  10. There's a complete other side to this he's not discussing.

    The bond market is extremely manipulated by the Fed. The Fed BUYING trillions of dollars in bonds keeps interest rates low and bond prices high as bond prices and interest rates are inversely related.

    The bond market is NOT a free market and it can't be when many central banks are buying bonds world-wide. Central planning is like herding cats as people in the economy will never act the way they want. QE most definitely causes asset price inflation and this is definitely a type of price inflation. Consumer Price Inflation is merely part of the picture. House price inflation and stock market price inflation is curiously left out of this analysis.

    Banks SELL bonds to the Fed and make money of the transaction. If the Fed wasn't buying at a price that made the banks money then the banks would not sell. The Fed buys for too high of a price (and Wall Street firms make hundreds of millions in commission doing the trades). Banks do not care about maintaining the principle but rather live in the spread between interest rates they give depositors and interest rates they make loans with. The Fed is unable to force banks to sell bonds so they have to make it profitable to the banks so it is profitable. It's not a 1-to-1 swap as it can't be as the Fed has to give more money for the bonds than the market otherwise would. This money made is instant and the banks don't have to worry about what inflation is going to do to the profit they'd receive on say house loan interest in 10 years.

    QE has the effect of lowering interest rates and let's banks make money with basically no risk and also inflates assets. This in my opinion crowds out more risky loans that could be made to businesses that may actually stimulate real economic growth. Extremely low interest rates also protect malinvestment that's already been made and allows speculators to buy assets with collateral with extremely low rates and massive firms to swallow smaller ones with cheap loans. It does little for the small saver who works for a living that's got a couple thousand in their bank account. The markets are extremely distorted.

    And yes there can be massive inflation with this process. The US Federal Reserve is buying US Treasuries which means it's indirectly monetizing the national debt. The US government selling bonds so it can pay people not to work during covid both injected money into the economy AND caused supply chain problems as those workers were no longer producing. The Fed directly supported this process. This most definitely does cause inflation. The Central Bank policy is supporting the Federal Government which keeps getting bigger and bigger and more inefficient by the day.

    The whole system IS deflationary in nature if it's allowed to collapse inwards on it's own weight. However, the Federal Government and the Federal Reserve do not want this to happen.

    The fear that I have is that the national debt and spending will just keep growing and crowding out the public sector and the Federal Reserve will keep it's easy money policy to keep the bubble inflated. Government spending is already >40% of GDP. Eventually the problem will become too large for the Fed and Gov to handle and either deflation/default will happen if the bubble is allowed to collapse or the government with the support of the Fed will inflate the dollar out of control.

    Sustained GDP growth is always a way to "fix" the problem but no economy could possibly grow forever. I think the US economy grew and prospered for decades DESPITE the Federal Reserve and Government working together to stifle it.

  11. If you want to get ahead then you better get out of debt. Get rid of the mortgage, car payments and never carry over credit card debt. Those out of debt sleep better.

  12. I think it would be foolish to think banks will keep the 2.3 Trillion in their vault long term. So maybe as of today it’s somewhat deflationary, but in the long run it’s entirely inflationary. They know a overvalued market bubble in everything is here, but don’t want to scare people into popping it.

  13. No inflation? What about the stock market , [un] real estate , bond market.Inflation is were all the funny money goes.You are looking the wrong way.
    Everything is made in China so it doesn't go in the real economy but buddy it goes somewhere.Mirrors ,mirrors……..
    Bubbles ,bubbles as far as the eye can see .Buy our eye glasses while they are cheap.

  14. You do such a great job of distilling down really complex concepts into something easy to understand. Great mix of data!!

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