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i get asked pretty repetitively if we're entering another era of stagflation now stagflation is a phrase that basically got coined in the 1970s and so an awful lot of people who were young like i was in the 1970s young in business uh now i'm in my 70s and a lot of investors in the in their 70s and the investor class think back to that time period quite readily and they think of stagflation and a lot of young people have heard the phrase stagflation never really lived through it and think oh my gosh that must be just terrible and what have you now the reality is could be terrible could be we're about to enter it do i really know no i don't do i think we are likely to be in an era of stagflation no i do not can i be certain of that no i cannot the reality of stagflation is it comes from a world that not just in america but around the world because prices are set globally they're not just set in one country in a world of free trade but stagflation comes from a world where at every phase of expectation of future problem central banks move to increase the quantity of money a little more and a little more and a little more at a slightly accelerating rate so you get rising inflation that won't go away and there's more fear of downside in the economy than there is of inflation the governments of the world tied to kobud made some wrong-headed mistakes not terribly surprising in a chaotic period like copa that that would be true and that has created inflationary problems ukraine war adds to that but we do have a lot of fear right now of inflation and central bank lending as we speak is not actually highly inflationary oriented my suspicion because that's true and the right way to see that is that the real quantity of money and i've i've talked about this many times in the past and i'm not going to belabor the point now but the measurements of the quantity of money are actually not very accurate today they're less accurate than they used to be because of the ways money's actually used money is and only is whatever it is that we use to actually buy and sell stuff and services stuff whether it's consumer goods or industrial goods or securities or buying crypto or whatever it is we might buy goods services stuff money is what we use for that what's thought of as money often that isn't used for that isn't really money and money is created in a system a western system like ours by the net banking system increasing outstanding loans so what you really do is look to net lending to see what's going on with the creation of money it's a pretty tight measure it's the best measure and that's actually growing at a fairly okay rate it was growing at about four percent which is not inflationary earlier this year and it's accelerated in the last couple of uh months as the short end of the yield curve has gotten steeper a point no one has noticed in sending banks to lend uh to a little over five percent was uh five percent uh in the first quarter uh and you know that's uh consistent with a little inflation but it's not consistent with a lot of inflation if the economy's grown at a couple of percent and you increase the real quantity of money by about five percent maybe got about three percent inflation which is of course feel consistent with the long-term bond rate uh is that stagflation three percent inflation i don't think so it's a little above the fed's long-term target of two percent so the reality is i don't think we are going to have stagflation i think we have a lot of fear of high inflation rates that's why you see it so much in the media as it's spiked tied to the aftermath of all the covet in and outs and rules and funny strange things that governments around the world have done from every part of the world as well as uh dislocations created by the sanctions tied to the ukraine war and other features tied to the ukraine war but all those will pass and i think we will see this inflation spike go away i think it'll take a little longer than anyone would like but that's not stagflation that's a spike in inflation and it should be with time patiently transitory and go away and re avert to lower levels do i think the economy is stagnated no the economy is growing around the world it's not growing robustly but it's growing around the world and that's also not s stag part of stagflation so i don't think we're going to have that we're not in that uh the fear of it is actually a healthy sign because fear of false factors always bullish and i want to thank you for listening to me on this
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