The Inflation Fear That Never Materialized

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As we approach the end of the tax reform bill saga, I just want to remind everyone how the fear of federal debt leading to massive currency induced inflation never happened even with trillions of debt on the books.

I am going to let the charts speak mostly for itself

CPI (Consumer Price Inex) Inflation has been calm and the rate of growth has been falling

From Doug Short: 
https://www.advisorperspectives.com/dshort/updates/2017/12/13/consumer-price-index-november-headline-at-2-2-core-remains-below-2

DEC CPI short

DEC CPI Long

PCE  (Personal Consumption Expenditures) Inflation has not only been steady but even in 2017 the rate of growth fell. This is one of the reasons why earlier in the year I wrote that the Fed needs more inflation.

https://loganmohtashami.com/2017/02/07/fed-still-needs-more-inflation/

From Doug Short: 
https://www.advisorperspectives.com/dshort/updates/2017/11/30/pce-price-index-october-headline-core
DEC PCE SHORT.png

Dec PCE LONG.png

The dollar never collapsed and in fact it rose like it usually does before the first-rate hike

https://www.dailyfx.com/us-dollar-index

download

Interest rates not only didn’t rise with higher federal debt, they have been in a down trend on the long end since federal debt has exploded in this last cycle with 4 trillion of QE on top.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2017/12/12/treasury-yields-a-long-term-perspective

Dec 12 Yields

DEc 8th FED FUNDS

Dec 12 Fed Intervention
The reality for us as Americans is that tax rates are low and the debt is going to expand a lot going into the future because we love low tax rates, we love military spending and we are about to embark on an epic rise of older Americans collecting transfer payments.

From Doug Short 
https://www.advisorperspectives.com/dshort/updates/2017/11/13/debt-taxes-and-politics-an-updated-perspective-on-federal-tax-history

TAX REALITY
DEBT TO GDP REALITY4df1376bd5e6260db1e7719ee20f431e

One more thing, China does own us.

From  a resourceful website: Political Calculations:

http://politicalcalculations.blogspot.com/2017/10/to-whom-does-us-government-owe-money.html#.WjafJ1WnGUk

2017 Who owns the debt

I am not a big fan of MMT ( Modern Monetary Theory) and have gotten into many battles with proponents of that theory over the years, specifically regarding how they interpret economic data. However, they have opened eyes to the fear of a massive federal debt leading to currency induced inflation should be questioned.

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami