The Inflation vs. Deflation Debate

<p>Will the FED sacrifice the stock market or the dollar? &nbsp;In the face of so much monetary stimulus, some people may claim that the Fed has two choices: 1) keep printing trillions and let inflation skyrocket or 2) tighten monetary policy and watch the stock market crash. &nbsp;&nbsp;</p> <p><br></p> <p>🚀 Join the VIP Membership Group (Discord) today! ► https://elblancofinance.com/&nbsp;</p> <p><br></p> <p>I'd like to present a third alternative, the alternative that shows that neither will be necessary : The printing will stop AND the economy will be able to support a tightening of monetary policy. &nbsp;&nbsp;M2 is loosely correlated with inflation. Therefore, we must consider more factors than just the amount of dollars in circulation, such as supply and demand. I believe that the prime cause of inflation stems from the imbalance in S&amp;D. &nbsp;Supply is subject to so many factors like geopolitical and environmental factors such as lockdowns. As you can see, global supply chains have never seen this much pressure before. This dynamic allows businesses to increase their prices due to scarcity. &nbsp;Looking into the future, I think that it's safe to assume that supply chain issues will subside. This will add deflationary price pressures into the mix. However, due to price stickiness, some categories of goods &amp; services will not deflate. It's on a case by case basis. For instance, the prices of commodities will likely experience downside price pressures. Whereas rents and the prices of software subscriptions will not. Right now, the biggest risk to inflation is supply chain issues coming from China in my opinion. &nbsp;</p> <p>In normal times, demand has generally predictable levels of elasticity. However, the pandemic skewed everything. Due to lockdowns and stimulus, people were unable to spend their money, leading to pent up demand. Once unleashed, without being met by the equivalent supply, the demand created immense pricing pressure, causing inflation. &nbsp;&nbsp;</p> <p><br></p> <p>With the savi