A potential problem is looming, and the media are pursuing a new story that builds on the following chain of reasoning: 1) higher inflation is coming;2) if CBs increase interest rates debts will explode and recession may ensue; 3) CBs are caught in an impossible dilemma 1/12

It´s perhaps too complex for some tweets, but.. Registered inflation this year is bound to be higher than present forecasts, resulting from one-off price spikes and base effects That will not start a sustained high inflation process, but temporary higher inflation is possible 2/
For example, Euro Area inflation increased suddenly from several months at -0.3% to +0.9% in Jan. This jump resulted mostly from several base effects, especially the change to German VAT. Inflation expectations increasing but higher in the US than in the EA 3/
The major one-off base effect will come from oil prices that decreased abysmally in March 2020 and have recovered. Some estimates put US inflation in April reaching 4%! After vaccinations, later in the year, pent-up consumer demand will also increase prices.4/
Despite the increased spending of accumulated savings, the savings rate will remain higher than before Covid for precautionary reasons (Fig 1). No permanent spending spree will materialise. Wages will remain subdued for a while (Fig2). Higher but not high inflation is coming.5/
However, seeing a slight inflation increase, old hands will start to hyperventilate (wrongly) about high inflation, some even thinking about old monetarism (this monetarism would require another thread). They will increase pressure on Central Banks (CBs) 6/
Temporary slightly higher inflation will increase bond yields, so investors must reduce or hedge duration.Higher yields tend to affect discount rates by more than the expectation of earnings-reaction to higher nominal growth & stock prices may suffer. (CBs shouldn´t intervene) 7/
CBs will not react to inflation going above 2% for a while. The FED already said it by adopting an average inflation targeting framework that allows for higher inflation offsetting the previous underperformance. The ECB & others will have to follow suit. 8/
My 1st tweet media story would require that inflation goes PERSISTENTLY higher, e.g.>3%<4%, unlikely as it seems. But let´s assume that inflation obliges. Would CBs refrain from increasing policy rates? No. Would debt sustainability explode? It depends... 9/
Inflation is associated with many things that the basic story ignores. Going up, it´s accompanied by higher nominal GDP level and growth. That helps to absorb old debt in a lower ratio to GDP. Overall outcomes depend on policies & nominal GDP growth vs nominal interest rate.10/
It´s well known that after WW II, higher growth and inflation contributed to the absorption of the war debt. True, a bit of financial repression also helped, but that doesn´t imply unchanged interest rates. In many cases, there was no need for fiscal austerity. 11/
The situation is different now. We cannot count on the real growth rates like the ones after WW II as we are still in a secular stagnation phase. But then this means that without sustained higher growth, persistently high inflation becomes more unlikely.12/12

More from Finance

1/ My Mission: To Spread Financial Wellness (thread)

Here’s what "financial wellness" means to me

⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️⬇️

2/ Mindset

Humans are programmed to think short-term

Evolutionary, thinking short-term makes sense. It helps with survival.

Financial wellness is all about training yourself to develop a long-term mindset

Not easy -- it takes practice


3/ Mindset

If you join the right tribes, you can’t help but improve

My favs:
@AffordAnything
@ChooseFiFI
FinTwit
@MicroCapClub
@themotleyfoolFool
@visualizevalue

Twitter / Podcasts / Blogs / YouTube -- when used correctly -- are amazing


4/ Mindset

Educate yourself - constantly!

Especially about:

1⃣Money
2⃣Relationships
3⃣Health

These 3 categories have an outsized influence on all areas of your life

Books


5/ Career

In the beginning, focus on growing your income

Do more than what is expected

Become a lynchpin

Find a career that you ENJOY (<- important!) that also has high-income potential

Start a side hustle (<- important!)

Build your talent
** MEGA THREAD ON Cryptocurrencies/Blockchain**

I wanted to know the best resources to learn about cryptocurrencies and blockchain for someone with zero knowledge. I asked Twitter, and Twitter answered.

This thread is a compilation of the best resources I was recommended. 👇👇

Let's start with ** BOOKS **

The first thing you should do before you pick up any book:

Learn about Bitcoin & Ethereum by reading the respective whitepapers.

- [Bitcoin white paper](https://t.co/cErOaFn6QL) by Satoshi Nakamoto

- [Ethereum White paper] (
https://t.co/0g5kYCGJGq) by Vitalik Buterin

Even if you are not tech savvy, you can get a good grasp about how blockchain functions from these papers.

1) *The Basics of Bitcoins and Blockchains: An Introduction to Cryptocurrencies and the Technology that Powers Them* by Antony Lewis

This book covers topics such as the history of Bitcoin, the Bitcoin blockchain, and Bitcoin buying, selling, and mining.

It also answers how payments are made and how transactions are kept secure.

Other cryptocurrencies and cryptocurrency pricing are examined, answering how one puts a value on cryptocurrencies and digital tokens.

You May Also Like

And here they are...

THE WINNERS OF THE 24 HOUR STARTUP CHALLENGE

Remember, this money is just fun. If you launched a product (or even attempted a launch) - you did something worth MUCH more than $1,000.

#24hrstartup

The winners 👇

#10

Lattes For Change - Skip a latte and save a life.

https://t.co/M75RAirZzs

@frantzfries built a platform where you can see how skipping your morning latte could do for the world.

A great product for a great cause.

Congrats Chris on winning $250!


#9

Instaland - Create amazing landing pages for your followers.

https://t.co/5KkveJTAsy

A team project! @bpmct and @BaileyPumfleet built a tool for social media influencers to create simple "swipe up" landing pages for followers.

Really impressive for 24 hours. Congrats!


#8

SayHenlo - Chat without distractions

https://t.co/og0B7gmkW6

Built by @DaltonEdwards, it's a platform for combatting conversation overload. This product was also coded exclusively from an iPad 😲

Dalton is a beast. I'm so excited he placed in the top 10.


#7

CoderStory - Learn to code from developers across the globe!

https://t.co/86Ay6nF4AY

Built by @jesswallaceuk, the project is focused on highlighting the experience of developers and people learning to code.

I wish this existed when I learned to code! Congrats on $250!!
1

From today, we will memorize the names of 27 Nakshatras in Vedic Jyotish to never forget in life.

I will write 4 names. Repeat them in SAME sequence twice in morning, noon, evening. Each day, revise new names + recall all previously learnt names.

Pls RT if you are in.

2

Today's Nakshatras are:-

1. Ashwini - अश्विनी

2. Bharani - भरणी

3. Krittika - कृत्तिका

4. Rohini - रोहिणी

Ashwini - अश्विनी is the FIRST Nakshatra.

Repeat these names TWICE now, tomorrow morning, noon and evening. Like this tweet if you have revised 8 times as told.

3

Today's Nakshatras are:-

5. Mrigashira - मृगशिरा

6. Ardra - आर्द्रा

7. Punarvasu - पुनर्वसु

8. Pushya - पुष्य

First recall previously learnt Nakshatras twice. Then recite these TWICE now, tomorrow morning, noon & evening in SAME order. Like this tweet only after doing so.

4

Today's Nakshatras are:-

9. Ashlesha - अश्लेषा

10. Magha - मघा

11. Purvaphalguni - पूर्वाफाल्गुनी

12. Uttaraphalguni - उत्तराफाल्गुनी

Purva means that comes before (P se Purva, P se pehele), and Uttara comes later.

Read next tweet too.

5

Purva, Uttara prefixes come in other Nakshatras too. Purva= pehele wala. Remember.

First recall previously learnt 8 Nakshatras twice. Then recite those in Tweet #4 TWICE now, tomorrow morning, noon & evening in SAME order. Like this tweet if you have read Tweets #4 & 5, both.