150.2 History Lesson: Inflation vs. Bond Yields vs. CPI

———Ep 150.1 Summary———
We review the 1950s, 1960s, 1970s, 2000s and 2010s to study how bond yields reacted to persistent and pervasive monetary expansion, stagnation and contraction as well as how bond markets handled transitory consumer price shocks due to supply/demand imbalances.

Macropiece Theater with Alistair Cooke (i.e. Emil Kalinowski) reading the latest essays, blog posts, speeches and excerpts from economics, geopolitics and more. Interesting people write interesting things, why not listen and hear what they have to say? You could do worse things with your time (i.e. Bloomberg, CNBC, et cetera). Recent readings include thoughts from George Friedman, Lyn Alden, Daniel Oliver, Michael Pettis, the Bank for International Settlements and yes, even Karl Marx.

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Twitter: https://twitter.com/JeffSnider_AIP
Twitter: https://twitter.com/EmilKalinowski
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Emil YouTube: https://bit.ly/310yisL
Art: https://davidparkins.com/

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———Ep 150.2 Topics———

00:00 Intro: Bond yields don’t price the Consumer Price Index, instead they focus on inflation.
00:51 First Principles: Why is inflation always and everywhere a monetary phenomenon?
02:57 In the second-half of the 1950s (money) inflation began, but not by the Federal Reserve.
04:04 Bonds ignored transitory CPI spikes in the early-50s but not money-inflation in late-50s.
07:38 In the first-half of the 1960s bond yields tacked higher as consumer prices were level.
11:04 From 1967 to 1976 bond yields identified (money) inflation and (transitory) price spikes.
14:06 During the 21st century bond yields continue to identify inflation and price spikes.
16:46 The 2020-21 price spike seen in the US CPI is being ignored by US Treasury bond yields.
19:16 Outro: if there isn’t enough money available then the economy won’t be healthy.

———Ep 150.2 References———

Do Bonds Accurately Price Inflation? Since Before Any of Us Were Born: https://bit.ly/3ENEYfY
Alhambra Investments Blog: https://bit.ly/2VIC2wWlin
RealClear Markets Essays: https://bit.ly/38tL5a7


Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski. Art by David Parkins, quickest draw in the Wild West. Podcast intro/outro is “Electro Animal” by Oh the City found at Epidemic Sound.