Going Out on a Limb on Inflation

Mainstream media is full of inflation stories. The reporting is shallow and comes with a lot of short and long term hand-wringing. I understand short term concerns, but I challenge the longer-term hand-wringing.

I think that the inflation we are now seeing will be temporary and by Spring 2022 will start to rapidly decline. We are moving through a short-term massive disruption in the global economy, not the beginning of baked in long-term inflation.

Over the last few months, the financial press has framed the current bout of inflation as to whether it is a short-term blip or a more dangerous long-term trend. It is the former. The only question is when will the current 6% inflation rate decline. I think it will slowly fall off starting in January and will be at minimal levels by late Spring. Why I to see the inflation as temporary:

-COVID-19 renders any year-to-year comparison invalid 2019–2021

-we have not fully moved beyond the pandemic status globally.

-when given the cover of inflation, companies will raise prices

-buying habits will be changing rapidly

Let’s take a closer look at these four.

COVID-19 renders any year-to-year analysis to be invalid.