US Government Bonds 30YR Yeld (US30Y)

TVC:US30Y   United States 30 Year Government Bonds Yield
Situation, for the moment, remains standing. The unemployment rate has risen to 5.9%, this is a figure to be taken into consideration because in fact in the US we are in the midst of reopening, therefore an unemployment rate that rises after everything is reopening is a non-alarm signal, at least of attention. The fiscal stimulus is about to end, as are family allowances. The savings rate has risen and consumption has not had that hoped-for surge. Perhaps the pandemic event has changed (perhaps temporarily) the propensity to spend and increased that of saving. In itself it is not a bad thing, on the contrary, saving generates healthier purchases because it is not in debt. for companies to continue to make profits, the level of raw materials needs to drop a little, but not too much. There is plenty of capital, as well as manpower. So perfect data in the situation we are in.

However, I believe that the increases in raw materials will not be able to reach the final consumer. Today's employment report is emblematic. There are major problems in the supply chain of many industries. And this factor will also affect prices, but how? Finally, the M2 that does not circulate. If money does not circulate it does not create inflation . QE and all other financial stimuli, for the moment, remain in the financial system and the only inflation I currently see is asset inflation . So how to take advantage of a possible and healthy decline in the markets?

The alarms on the demographic collapse of the western population and also that of China and Eastern Europe intersect with the increase in the average age of the population. The output of production will be decidedly higher thanks to the significant innovations on the productivity front, however, the demand for consumption, determined by a large portion of the population that does not produce (the elderly), will be lower. The effect will have a deflationary structural dynamic. These correlations show that the demographic dynamics of developed economies have not only helped central banks to keep inflation low, but may also undermine their efforts to keep it above zero in the long run. The demographic dynamics underway in Europe, Japan and China have deflationary effects. Demographics, inflation and economic stagnation are concepts that interact with each other on a tighter level than is commonly thought. The more the population advances over the years, the more the economy slows down. The powerful structural forces represented by excessive indebtedness, demographic aging and technological disruptions will continue to provide disinflationary pressure. These are profound structural forces that have been developing for decades and that will certainly not disappear overnight. The rapid growth of the Fed's M2 monetary aggregate measure is a key factor behind the reflationary hopes. The theory might suggest that this portends a spike in inflation , but one cannot look at the monetary aggregate in isolation - it is crucial to consider the velocity of money circulation as well. This is a rate that measures how often a currency unit is used to purchase goods or services. The coronavirus crisis has prompted a drastic drop in that speed. This suggests that more people are saving or investing their money rather than spending it, which is inherently deflationary. What could change the inflation scenario would be if central banks took more serious policies, such as Modern Monetary Theory ( MMT ), "helicopter money" (making payments directly to consumers) or a more permanent shift towards debt monetization.


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