Inflation Generation: The Lasting Impact of Monetary Policy
To investors, The last three years have been economically volatile. We had the pandemic-induced liquidity crisis of March 2020, a face-melting rally of financial assets that created an asset bubble, a legion of drunk consumers who helped usher in a 40+ year high in inflation, and a Fed-mandated destruction of financial asset prices to close out the three year run. Chaos. Uncertainty. Volatility. Choose whatever words you want to describe what just happened, but it was a hell of a ride. The problem is that the whiplash across markets and economies will have a lasting impact on consumers and investors, especially in younger generations. You would have to be at least 50 years old to remember the last time the United States dealt with high inflation. This means more than 200 million Americans are experiencing this phenomenon for the first time. So where does this impact show up? In the short term, individuals start to change their consumption patterns. A recent survey by Trustpilot highlights just how significant this change is for Valentines Day this year. Christine Mui writes:
Some may argue that this consumption behavior change is only short-term though. Unfortunately, there is an increasing amount of research that shows a connection between inflation and stress. Kara Nassour, a licensed professional counseler, recently explained to Sarah Fielding how this potentially works:
This isn’t rocket science. Inflation causes financial problems. Financial problems lead to stress. Stress is bad for you. If inflation subsides, some will argue that the financial problems and ensuing stress will subside as well. I’m not sure that is true. Think of it this way…... Subscribe to The Pomp Letter to read the rest.Become a paying subscriber of The Pomp Letter to get access to this post and other subscriber-only content. A subscription gets you:
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