Whereas Einhorn thinks that inflation is coming, Hoisington think this couldn’t be further from the truth (and hence think the yield curve will be anchored at zero).
“Recent articles have suggested that the Federal Reserve and the Department of the Treasury are engaged in Modern Monetary Theory (MMT) or some form of “helicopter money”, the famous Milton Friedman phrase also referred to by Ben Bernanke. The inference is that once the virus is contained, these new efforts will yield different and more powerful economic and inflation results than did the Quantitative Easing periods following the 2008-09 Global Financial Crisis (GFC). Further, the suggestion is that the fiscal policy actions taken this year totaling $2.7 trillion will be far more effective than the $2 trillion stimulus package of 2009. Are these assertions that MMT is in place and monetary and fiscal actions will spur economic and inflation rates higher true? The short answer is no.”
What follows is a rather technical economic theoretic description of what is going on.
It is worth getting one’s head around this. Especially understanding how quantitative easing leads to increased excess deposits by banks at the Fed and not borrowing (a decision that is independent) and hence economic impact.
Overall they are predicting deflation – grim reading indeed.
