Gil’s Musings

Inflation? Yes, Then No.


Twenty-five years ago, I had an archery deer lease in Refugio County, Texas. One time, I headed down there after a long day at work and arrived at Two-J’s Restaurant just at closing time. The place was empty, but they seated me anyway and promptly delivered my order. The waitress asked me what I did for a living and then pressed me about my economics degree. After pondering a bit, she returned a short time later and pulled up a chair. She then asked me a profound and now poignant question: “How come the government doesn’t just print twice as much money and make it so that I can have more?” I replied, “Because with two times the money and the same amount of productivity, each one of your dollars is then worth 50 cents.” She seemed to understand. 

Fast forward to that reality today. Excess cash from stimulus checks is finding its way into real estate prices and stocks too. However, it’s eerily absent from the bond market, which did briefly offer commensurately higher interest rates, but then collapsed thereafter. 

What’s the Situation?

My take on the inflation situation has more to do with a dearth of workers and shortages of the products they make, like chip shortages disrupting the supply chain of cars. This also showed up in plywood prices, which I wrote about months ago and discussed on a half dozen podcasts. I predicted an impending collapse in prices that had momentarily produced a 7x multiplier, whereby $6.99 sheets briefly traded north of $50. Spot lumber prices have since collapsed -68%.

These machinations are the consequences of a brief global collapse in manufacturing production and the pig in the python on the other side. This bout of inflation will subside when Mr. Biden and the Fed remove their collective feet from the accelerator. Let’s hope they don’t get addicted to the adrenaline rush felt by the lower end of their constituents and allow that gang to steer the car off the runaway-inflation cliff, as Jimmy Carter did 40 years ago. 

Please see IMPORTANT DISCLOSURE information.

Subscribe to Gil’s Musings

Sign up to receive Gil’s periodic musings about investment trends, the stock market, investor behavior and current affairs. Join today and receive a handful of Gil’s favorite past musings, and be the first to receive his freshly penned thoughts

  • This field is for validation purposes and should be left unchanged.