Credit
Q
What is the situation with inflation right now?
A
Recent inflation is not a short-term "liquidity" problem subject to quick fix. It is a structural problem where businesses and individuals have built their income relying on resources that are now in short supply. That will take time to work out. Our situation at present is particularly difficult because it has been a long time where the economy has become dependent on unsustainable relationships between the prices of goods.
If it took 5-10 years to build a production structure that turns out is impaired, it will likely be some time before the supply / demand imbalance for important resources comes into line and inflation pressures reduce. Note that it took 20 years for 10Y treasury rates to fall from approximately 15% (1982) to 5% (2002).
If it took 5-10 years to build a production structure that turns out is impaired, it will likely be some time before the supply / demand imbalance for important resources comes into line and inflation pressures reduce. Note that it took 20 years for 10Y treasury rates to fall from approximately 15% (1982) to 5% (2002).