Here is El-Erian talking about the COMING supply problem (repeat of 2020 market crash) due to the spread of Delta variant that will impact economies around the world and the inflationary impact of it. Interestingly investors had been conditioned by market commentators and the US FED on the coming problem i.e. market will continue to rise and rise!!! The implicit message from El-Erian is that we may see yet another market crash and recession (perhaps just around the corner) when the FED starts acting on tapering or raise interest rate: the feedback loop will close and the intensity of the resultant effects will be much greater each time.
(5) El-Erian on What Two Things Could Shake Up the Market - YouTube
Here is a chart that should ring alarm bell on inflation. Transitory? Yes everything is transitory if the time-frame is long enough!!!
▷ M2 Money Supply Growth vs. Inflation - 152 Year Chart | Longtermtrends
Here is a simplistic comparison of GP and M2 growth rate:
2008: GP=$1,000 M2=$7.5T Now GP: 1.8 times of 2008 and M2: < 3 times of 2008
2011: GP=$1,800 M2=$9.7T Now GP: 1 time of 2011 and M2: 2 times of 20011
Effectively both snapshots shows that GP is well below the growth rate of M2. To bring GP on par with M2 growth rate:
Against 2008, GP should be ~$3,000 now
Against 2011, GP should be ~$3,600 now
Take your pick!
Please note, above is just a very simplistic comparison between GP and M2 and my interpretation of the undervaluation of gold against M2. Obviously market/investors perception of gold may have changed and therefore growth of M2 does not have to be reflected in growth of GP. Market price on gold is after all, the willingness of buyers and sellers to transact at a given price. There is no such thing as SHOULD and it is more of a MAY.
Enjoy your day.
Cheers.
