Hyperinflation Is Coming, but Central Banks Can’t Shake off Their Straitjackets
If Warren Buffett warns that a long-lasting inflation wave is ahead, and the head of the Federal Reserve tells you not to worry, it will only be transitory, whom would you believe? Neither Buffett nor Jerome Powell can be described as competent economists, but while Buffett’s Berkshire Hathaway fund has many companies in its portfolio which are dealing with the real economy, Powell is concerned with keeping the financial bubble alive – which is not conducive to truth!
Answering a question at a May 1 shareholder meeting, Buffett said, “We’re raising prices. People are raising prices to us. And it’s being accepted.” In other words, it is not temporary. “We really do a lot of housing,” he continued. “The costs are just up, up, up. Steel costs, you know, just every day, they’re going up. And there hasn’t yet been –the wage stuff follows.
I mean, the UAW writes a three-year contract, we got a threeyear contract. But if you’re buying steel at General Motors or
someplace, you’re paying more every day.”
Emphasizing the duration of the inflationary pressure, Buffett said, “It just won’t stop. People have money in their pocket, and they pay the higher prices…. There’s quite a bit more inflation going on than people would have anticipated just six months ago or thereabouts.”
As financial speculation continues to grow and high commodity prices are already being passed on to production and consumer prices, no one can outright deny that an inflationary wave is coming. A recent newsletter of Bank of America even mentioned the threat of “hyperinflation”. But true to the central banks’ narrative, and to prevent a change in monetary policy, mainstream media and economists insist that it will only be “transitory”.
Monetary authorities are indeed worried about a crash, but still hope to prevent it by injecting even more liquidity and bailing out the system with a $30 trillion “green” bubble.
The worries of the Federal Reserve’s board of governors about a coming financial crash centered in corporate stock and bond markets are reflected in its annual Financial Stability Report: 2021, released on May 6. Presenting the FSR, deputy chair of the Fed, economist Lael Brainard, pointed to the stillresounding failure and liquidation of the Archegos hedge fund, which involved liquidation of some $50 billion in stock values on international exchanges and has hit major banks with somewhere between $10 billion and $100 billion in losses.
“The combination of stretched valuations with very high levels of corporate indebtedness bear watching,” she noted, “because of the potential to amplify the effects of a re-pricing event.” The FSR highlights the potential for non-bank financial institutions such as hedge funds and other leveraged investors to generate large losses in the financial system. That is as far as a banker can go in sounding the alarm without generating panic.