War and inflation.
I see attempts to explain inflation are intensifying using warfare, stalled globalization, wheat, gas, and all as an excuse. But if you remember, inflation had started to rise earlier: if anything, war is a convenient scapegoat.
There are only two things I would like to say. The first is "we – me and others – told you so.". The second is "this is only the first wave of the crisis".
On the first there is little to say. For years many, myself included, have been saying that you can delude yourself that bags absorb the money you print, but like any sponge, at some point what you have absorbed will be released back.
And this will bring out all the inflation that has been produced by printing money. We are still at the beginning. Judging by the mass of printed coins, a peak of up to 20-25% is plausible, at a guess.
Printing money increases inflation. If my garden produces two apples and you have two euros for apples, the price will be one euro per apple. If you have four, it becomes two euros per apple. Because if with all the euros you have you can only buy apples, it is clear that the number of euros is spread over the number of apples.
The cunning of the printed money merchants was to understand that there were proxies, which took time:
it is still true that printing money produces inflation, except that years pass between cause and effect.
So you think "but now the central banks raise rates, and everything is back in place". Interestingly, you have decided that the relationship between inflation and rates is an algebra, or an arithmetic.
But that's not necessarily the case: if you walk backwards for a day tomorrow, you don't become younger one day. Likewise, it is true that if you decide to walk all day you will age by one day. What is not true is that by walking backwards you can recover that day.
Claiming that raising rates lowers inflation just because lowering rates raises it requires monetary policy to be a field of conservative potential. Theorem that no one has ever proved. Believing it is popular superstition, worthy of the most ignorant plebs.
Forget that the measures taken by central banks can reverse the monetary path. There is no rational or scientific reason for this.
Inflation will rise again, and again, and again.
The real problem concerning the consequences of twenty years of free money is not so much inflation, but its effects on today's economy.
In the sense that the increase in inflation will hit the two weakest sectors of today's economy. Real estate and joint stock companies.
There is little to say about the effects on real estate: home loans will increase in cost. In short, the installments will become higher. Many who wanted to buy a house will give up, remaining in rent. And many of those who fail to pay the installment will go to a smaller / uncomfortable house, selling the one they bought.
The collapse in the value of real estate, hitherto hidden with techniques bordering on scam, is one of the next steps. So, now is not the time to invest in brick.
The second problem is that of corporations. We know well that with an inflation of 7%, for example, the currency has lost 7% of its value. The trouble is that, listed on the stock exchange, there are companies that are LITERALLY made of "money": they are the so-called corporations. They are made of the same substance as money. Which is devaluing. And therefore, corporations are depreciating.
And if the stock exchanges were already full of crushed companies that lived on easy credit, this sudden drop in value will throw these companies upside down.
So if you are an employee of a listed company and they ask you to convert the severance pay into shares, don't do it. If you care about your money, that is. They ask you because they need cash, which can be bought at a higher interest rate.
Ultimately, therefore, the wave of inflation is not over: real estate and stock exchanges will end up in the storm at the same time.
Why am I saying this? Do I want to bring bad luck?
No. But when I hear the theorists of coin printing that the fault lies with the war, the covid, the cynical and cheating fate, China, Russia, Bergamo, the witches, I laugh.
It makes me laugh because all the time in which easy money was printed, some were saying to you "look, now inflation arrives, it is only a matter of when it arrives, not IF it arrives". And they laughed in your face: there was always a study of the university 'of the fuck that you were wrong.
Good. Now try to blame reality. Maybe with a Bocconi study, he believes you.