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IPFS News Link • Economic Theory

BofA Hints That Weimar 2.0 Could Be Coming

•, by Tyler Durden

It's no secret that BofA's Chief Investment Officer has been warning that 2021 - the  year of the vaccine - is one where real inflation (as opposed to financial) will run amok sooner or later, and in his latest Flow Show he repeats his two main contentions about how events will play out in the coming months, namely "the velocity of people will rise" and "the velocity of money will (also) rise".

Addressing the first,  Hartnett writes that since the core 2021 trends will be "vaccine>virus",  and "reopening>lockdown", this means that human mobility will rise & macro data will surge particularly in Q2 when investors should expect US GDP >10%, EPS >20% CPI 3-4% Y/Y, or an economy in fullblown overhating mode. 

This taken in conjunction with secular trends of bigger government, economic nationalism, fiscal excess, dollar debasement, War on Inequality, there is little wonder inflation breakevens & lead indicators are surging...

... and that small US business price plans over next 3 months are at highest since Nov'18...

... although whether or not they can actually achieve this is a different matter.

Stepping into the realm of monetary policy, and specifically its velocity, BofA reminds us that in the past 12 months, the US has raked in a $3.5TN (17% GDP) budget deficit, coupled with the injection of $13.3TN in global central bank liquidity (15% GDP).