We all know about 'confirmation bias'. That tendency for humans to look for information and opinion that supports their own beliefs or opinions. Sometimes that bias is just that, a bias that leads one astray. And sometimes one is right in ones beliefs and the signs of confirmation are just that. Confirmation of a trend or event.
The numbers on consumer spending and prices came out today and showed surprising strength.
This is the first strong sign of possible inflation because when consumers pay higher prices they can afford to pay higher prices and higher prices allow further price rises, etc.
Higher prices stimulate production which requires money and money is credit, etc...
And all of this together means the money tends to circulate faster....
The gold bugs may be right again.
Keep an eye on the U.S. Dollar. The next question will be 'when is the Fed going to raise rates to control this inflation?'. My answer is that the Fed is in no hurry to nip this delightful prospect of inflation, and a weakening U.S. Dollar, in the bud. I think they will want this economy to regain some money velocity so they will drag their heels on raises.
The "bond vigilantes" have been neutered. They are licking their wounds so this counterbalance is a long ways off, not to say that bonds may not work their way down some....
If I had to pick one day to spot a trend change in the disinflationary trend of the last years this would be it.
Time will tell.
Consumer price news today
Keep an eye on the Baltic Dry Index...