Inflation Reaches Unicorns

John Mauldin Thoughts from the Frontline June 24, 2022

One reason today’s inflation has us all so concerned is we went a long time without any—or at least not much. That wasn’t normal. In the 1990s, a 3% annual Consumer Price Index reading was common and almost unremarkable. CPI approached 5% in 2005 and was briefly over 5% in 2008. But from 2012 until last year, 3% was a hard ceiling—to the point where Federal Reserve officials worried more about generating inflation than preventing it.

At the same time, many households faced constantly rising bills for healthcare, housing, and other essentials. The benchmarks certainly didn’t reflect common experience. But inflation was, if not actually low, at least lower than in the past. This is one reason the prospect of extended 5%, 8%, or higher inflation feels so dreadful. We’ve forgotten what it was like.

Post-2008 monetary policy unleashed deflationary forces no one anticipated. As often happens, well-intentioned plans had unintended side effects. Years of near-zero interest rates didn’t just produce stock and real estate booms. They also changed how businesses operate in ways that are now adding to our inflationary pain. The Fed and other central banks financialized markets and business to an extent that we are just now recognizing, distorting the economy in ways that will haunt us for years.

As you’ll see today, interest rates aren’t simply the price of borrowing money. They are also information, providing signals telling economic players what to do. Interest rates are in fact the price of time. Low interest rates don’t value time very much. Bad signals produce bad outcomes… and that’s where we are now..................A growing number of large, well-known companies are choosing to stay private long past the point where they would once have gone public. It’s become common enough to have a term. They’re called “unicorns.”............To Read More....