Is inflation 'doom' looming because of trillions 'sloshing' around'?
[Editor's note: This story originally was published by Real Clear Markets.] After all, the Feds humongous monetary stimulus exploded the money supply. Then, too, Uncle Sam drunken-sailored nearly $3 trillion in 2020 COVID relief--another $1.9 trillion this yearand up to $4 trillion more under discussion. All sloshing and splashing around. With GDP now nudging pre-lockdown levels, pundits near-universally envision increased inflation. But maybe not! First, despite conventional wisdom, Fed policy may not actually have stoked true money creation. Second, so-called fiscal stimulus doesnt drive hot growtha historical reality few fathom. Inflation is always a monetary phenomenon, as Milton Friedman famously taught. Major inflation occurs when money creation grossly exceeds creation of goods and services, stoking overall average pricesthese days, globally. Pessimists see that now, with official money supply soaring and re-openings sparking pent-up consumers to goose spending. Just note recent CPI jumps, they howl! But those eyeball-grabbing year-over-year inflation bumps are math mirages, year-over-yearing to 2020s deeply depressed base prices. A reopening pop and related supply and demand imbalances explain month-to-month jumpsfleeting factors. Monetary theory says the Feds gargantuan, bizarre 2020 monetary efforts should have spiked huge inflation already. Partly because much of the money the Fed created might not be actual money as traditionally defineda medium of exchange. TRENDING: Lone officer races to 'shots fired' call, gets jumped after he arrives as crowd laughs and films  Definitions expanded over the decades from before I was first working 49 years ago. Current money measurements evolved from M0 (the only money in the earliest days--hard currency plus non-circulating bank reserves)to M2, then M3 and finally the Feds newest creation, M4, which combines currency, checking and savings deposits, CDs, money market funds, commercial paper, Treasurys with under a year to maturityand much more. I presume theyll soon create M5, adding Crypto, high-quality stocks and some commodities basket. Then, M6 with scrap plastic, COVID syringes, Tesla batteries, and sports franchises guestimated value. Presently, though, the concern is M4, which soared almost 30% in 2020. They arent. They arent money. You dont buy and sell stuff with themyou use money to buy them. Currently, relatively little chasing happens. Monetarists long thought velocitywhich measures how often the money supply changes handswas fairly constant. Todays limited velocity gauges long-term tanked after the Feds 2008 quantitative easing launchwith a subsequent 2020 nosedive toward record lows punctuating the plunge. Rather than stoking growth, last years money supply surge probably replaced velocity lost amid crushing lockdowns. Unlikely. Since 1971, America passed 16 major stimulus efforts. In the 12 months pre-passage, median GDP growth averaged 2.3%, usually with economies already recovering from downturns. Median average growth slowed to 1.7%. You read that rightgrowth slowed! No evidence exists suggesting fiscal stimulus actually stimulates. None. Almost no one sees that. Take 2017s Tax Cuts and Jobs Act. Twelve months later GDP growth slowedslightly, but slowed nonethelessfrom 2.7% to 2.5%. Or, consider 2009s $787 billion American Recovery and Reinvestment Act, the last of three 20082009 packages offering tax credits, infrastructure spending and more. The next year saw growthbut barely, at 1.7%. Maybe! Or maybe faster! That is unknowableno control set exists. Simply no hard evidence supports stimulus as turbocharging growth. Yes No Completing this poll entitles you to WND news updates free of charge. You may opt out at anytime. You also agree to our Privacy Policy and Terms of Use You're logged in to Facebook. Click here to log out. 96% (79 Votes) 4% (3 Votes)  One key reason: The notion approved stimulus rushes into economies is myth. No project is shovel ready. Biggies require endless permits, studies and approvals from multitudinous far flung government jurisdictional agencies. Snail-like progress means later budgets can shrink or even scrap the projects. (E.g., former California Governor Jerry Browns infamous bullet train boondoggle.) The past year offers further reasons stimulus usually doesnt stimulate. Surveys suggest Americans collectively spent roughly a quarter of their COVID stimulus checks, saving or paying down debt with the rest. New York Fed data echo this, showing credit card balances fell -13.8% y/y in Q1 2021. Loan growth surged on 2020 pandemic relief, but that faded fastlending has trended lower since June 2020. It all points to post-pandemic growth and inflation paralleling pre-pandemic trends after a brief slump and bump. Recent price jumps in commodities like oil, steel and lumber involved producers guessing wrong in 2020, shuttering capacity while underestimating the reopening rebounds strength and speed. Cutting capacity is always faster than restarting or adding more. So the fast bounce-back surprised producers with too little relative capacity. Rising prices encourage some to ramp back up. But it takes longer. Eventually, supply will rise like always, slowing prices climb. Prices are incentivesEcon 101. Even if inflation endures longer and bigger, markets arent doomed. Inflation initially escalates slowly, leaving investors time to adjust. Stocks weather initial price jumps well. Companies adapt, passing on costs to buoy profits. Stocks inflation-beating ability is one reason many retirees require equity exposure. Remember: Surprises drive marketsand stocks are well aware of inflation worries. Mays Bank of America survey showed global fund managers overwhelmingly expect above-trend growth with above-trend inflation. Major media herald inflation dread, big or small. Inflations surprise power is caput. Inflation fears fast ascent is sneakily bullishnot bearish. It shows broadly warming sentiment hasnt gotten too darned frothy. So leave the fretting to pundits and enjoy more of this late-stage bull markets upward climb ahead. Ken Fisher, the founder, Executive Chairman and co-CIO of Fisher Investments, authored 11 books and is a widely published global investment columnist. For more, see Kens full bio, here  [Editor's note: This story originally was published by Real Clear Markets.] SUPPORT TRUTHFUL JOURNALISM. MAKE A DONATION TO THE NONPROFIT WND NEWS CENTER. 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