438: Long Inflation Cycle Ahead: Here's Why | Patrick Ceresna, MacroVoices

Welcome to today’s episode of The Creating Wealth Show where Jason Hartman reminds you that there is an important distinction to make between interest rates, housing affordability and the ability to qualify for a loan based on the usual things, such as credit score and debt-to-income ratio. There's a general overriding concept of credit availability, not directly related to interest rates: this is the willingness of lenders to lend and the ability of borrowers to borrow, measured by the Mortgage Credit Availability Index (MCAI). The credit supply is down, meaning it is now harder to get a mortgage than it used to be.

Jason Hartman welcomes Patrick Ceresna, Founder of Big Picture Trading and host of the MacroVoices Podcast to the show to talk about the current macroeconomic picture we are facing today. Patrick explains why our inflation problems are not going away anytime soon. The only mechanism which the central banks have to slow an economy is the cost of credit, reflected in interest rate policy. However, the problem in this cycle is that when the inflation is not driven by massive demand, but rather supply issues, then the ability for monetary policy to actually have an impact diminishes.

We are in the midst of a bear market on asset prices which may not have fully reflected into the real estate markets yet, but in terms of stock markets, bond markets, even slowly into commodities and other things, there has been a deflationary cycle in assets, while there's huge economic inflation because the central banks have begun a very important process of trying to attack inflation by slowing the economy. The only mechanism which the central banks have to slow an economy is the cost of credit, reflected in interest rate policy.

However, the problem in this cycle, and why you have the debate of inflation, stagflation, or deflation is that when the inflation is not driven by massive demand, but rather supply issues, then the ability for monetary policy to actually have an impact diminishes.

We’ve created all sorts of supply shocks that add further stress points that create additional cost delays and shipping and all sorts of other issues that are not going away. And it's not going to be solved by the Fed increasing another 75 basis points next month. This is a problem where inflation has to be solved by a bigger cycle playing out. And that, unfortunately, is not one that ends in three months. It's a problem that resolves over a couple years. Inflation is an issue that's not going away anytime soon.

Key Takeaways:

0:28 Welcome Empowered Investors from 189 countries world wide

1:07 Mortgage Credit Availability Index (MCAI)

2:21 The Great Recession, the mortgage meltdown and The Big Short

4:22 Credit supply in a credit based economy

5:54 Empowered Investor Pro - EmpoweredInvestor.com

8:08 Wall Street is the modern version of organized crime

9:18 Regulating the food supply

10:42 Messaging apps and insider trading

13:51 Last week, the Euro reached parity with the dollar

17:14 Downward pressure on the inflationary spiral

18:21 Why Dave Ramsey is wrong

20:46 Today’s guest PATRICK CERESNA, Founder of Big Picture Trading

21:34 Patrick’s current macroeconomic picture

23:41 Energy shortage - oil vs green

27:11 CPI inflation numbers could come down, but it’s no merit of the Fed

28:49 The 70s had three waves of inflation

30:38 The global pandemic was a unique event

33:24 What investments do you own in an environment like this?

37:35 Could derivatives crash the global economy?

40:41 There a global system risk, not just American

43:09 We are in a fourth turning and there will be some major financial institution reset eventually

45:20 The destruction of purchasing value is the driver of a monetary driven inflation

46:46 The US dollar rising right now is going to keep inflation in check

49:10 At the end of every bear market is a once a decade opportunity to buy a lot of cheap stuff

50:56 A good investor or trader knows when to leave a party and go to a new one

52:54 Learn more at BigPictureTrading.com and check out Patrick’s podcasts: MacroVoices and Market Huddle

 

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