top of page
Search

INFLATION QUESTIONS PERSIST | CROUCH CONNECTION |JUNE 2021 "ADV"

  • tammycrouch
  • Jun 14, 2021
  • 4 min read



INFLATION QUESTIONS PERSIST


I continue to receive calls from clients concerned by the hysteria in the media concerning the threat of inflation. Many prominent economists forecast that the stimulus provided by Congress and the Fed will soon result in runaway inflation, causing interest rates to skyrocket and pop the “bubble” forming in asset values (including the stock market).


But comments from the Fed Governors as well as Chairman Jerome Powell send the message that everyone needs to relax. They believe that the long-term forces affecting inflation are still DIS-inflationary and that once the stimulus runs its course that the dis-inflationary forces will emerge again. So who are we to believe?


“SIGNS OF INFLATION EVERYWHERE”


The massive fiscal stimulus provided by Congress has ignited a surge in demand for all types of products that our supply chain has struggled to meet. Crippled by the Covid cutbacks and workers reluctant to return to work, the shortages have caused price increases that are almost shocking. The important question, I would argue is…HOW LONG WILL THE SHORTAGES LAST?


Breaking the stimulus into its two primary components, fiscal stimulus (provided by Congressional action) or monetary stimulus (provided by Federal Reserve action) helps us sort out the potential economic scenarios.


CONGRESSIONAL ACTIONS


The stimulus provided by Congressional action to increase government spending has been huge, dwarfing any stimulus ever provided during previous recessions. Furthermore, instead of bank bailouts, the stimulus program designed by the Trump administration’s brilliant Treasury Secretary, Steve Mnuchin (pardon the political statement), directed the stimulus payments straight to the American people who can be faithfully depended on to spend any money they have available.


This spending has created sales of products and services for American businesses and abundant job opportunities for American workers, saving many Americans from financial ruin. The resulting demand for products and services has far exceeded all estimates, causing shortages in many products and the sharp price increases we are seeing.


We may see the fiscal stimulus extended by the infrastructure package now being negotiated by the Biden administration, but many of the benefits provided by the previous stimulus bills will begin to dwindle soon. The somewhat controversial special unemployment benefits are scheduled to end in September and already being curtailed by many states.


In short, the effects of Congressional spending and stimulus will probably be substantially reduced by the end of this year and American businesses will probably have responded to the higher prices by sharply increasing the production of the needed products, meeting the demand for their products.


The result? Adequate availability of products and services equals reduced pressure on prices which means little further inflation or potentially even falling prices for many products.


FEDERAL RESERVE ACTION


In my opinion, the Fed seems to be getting unfairly blamed for most of this inflation we are now seeing. Many pundits are calling on Fed officials to curtail their “quantitative easing”, predicting that it will cause runaway inflation unless it is stopped. At the same time, no one seems to mind Congress discussing another $2 Trillion spending package, even though the current inflation is being caused almost entirely by Congressional spending which will most likely be curtailed soon by Republican and conservative Democrat Senators.


The “monetary stimulus”, provided by the actions of the Federal Reserve have provided stability to our financial system by keeping interest rates low and providing adequate liquidity (money) for businesses to survive until demand for their products and services returns. There is no question that many businesses would not have survived without the support of Fed action to purchase corporate bonds, but that support has now ended.


WHAT ABOUT “QUANTATITIVE EASING”


The other Fed action, a controversial practice called “quantitative easing”, or the printing money and using it to purchase government and mortgage-backed bonds, helps by keeping interest rates low. The pundits say that this will enable rampant government spending, allowing the government to spend the “printed money”, resulting in uncontrollable inflation.


I have read extensively on the subject, and I believe the fears are unfounded. Quantitative easing and the resulting “deficit spending” has not always caused inflation. A good example of this was provided to us by the Bank of Japan which adopted the feared “quantitative easing” on March 19, 2001, in their effort to reverse decades of deflation. They significantly expanded the program in 2013 under Prime Minister Shinzo Abe.


After two decades of significant “quantitative easing” and the highest debt levels of any major nation in the world, Japan has still not been able to create inflation. As of February of this year, Japan was still experiencing deflation instead of the feared runaway inflation. According to a recent Wall Street Journal article, Chairman Powell is trying to keep the US from falling into “Japan’s complex and sticky deflationary mind-set.”


BOTTOM LINE


My advice would be to keep your eye on Congress and unless there is a sharp swing in the Senate to support irrational deficit spending on an ongoing basis, inflation will be a relatively short-term problem. Newsletter salesmen and those promoting the latest “inflation protection” products will continue to fan the flames of inflation hysteria, but I would advise ignoring most of what you see on TV.


If that doesn’t work, just give us a call. This is probably more detail than you ever wanted but I enjoy conversations about this stuff and would be happy to give you a more detailed explanation or answer any questions you may have.



Sincerely,


Registered Principal

Financial Advisor



Kim Blackburn

Branch Operations Manager



Kay O’Connell

Financial Advisor




Buffett Quote:

"For 240 years it's been a terrible mistake to bet against America, and now is no time to start."

Warren Buffett



The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Dave Crouch and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.


 
 
 

Comments


Featured Posts
Recent Posts
Archive
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square

Visit

3326 Aspen Grove Drive

Suite 602

Franklin, TN  37067

Call

T: 615-778-9842

© 2019

Aspen Grove
Asset Management

book image_edited_edited.png

  Click to Read CRS Document 

Important Disclaimers

AGP Franklin, LLC ("AGP Franklin") is a Registered Investment Advisor ("RIA"), located in the State of Tennessee. AGP Franklin provides investment advisory and related services for clients nationally. AGP Franklin will maintain all applicable registration and licenses as required by the various states in which AGP Franklin conducts business, as applicable. AGP Franklin renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or pursuant to an applicable state exemption or exclusion.

 

Terms of Use

Please read these terms and conditions of use (“Terms”) carefully before using the website located at https://www.aspengroveassetmanagement.com/ https://www.strongtowerwealthmanagement.com/ (“Website”) or any of the information or services provided by AGP Franklin, LLC (collectively “AGP Franklin”, “we”, “our”, “us”) in connection with the Website. By using the Website, you acknowledge that you have read and understood these Terms and accept to be legally bound by them. If you do not accept and agree to these Terms, you are not an authorized user of the Website or any of the information or services provided by AGP Franklin in connection with the Website and should promptly terminate all use thereof. The terms “you” and “your” mean you and any entity you may represent in connection with the use of the Website. You may use your browser to download or print a copy of these Terms for your records.

 

AGP Franklin reserves the right to change, modify, add or remove portions of these Terms at any time for any reason. We suggest that you review these Terms periodically for changes. Such changes shall be effective immediately upon posting. You acknowledge that by accessing our Website after we have posted changes to these Terms, you are agreeing to these Terms as modified.

 

These Terms were last updated on January 21,2025.

 

Risk Disclosure

Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable.

 

Asset allocation may be used in an effort to manage risk and enhance returns. It does not, however, guarantee a profit or protect against loss. Performance of the asset allocation strategies depends on the underlying investments.

 

This website is intended to provide general information about AGP Franklin and its services. It is not intended to offer or deliver investment advice in any way. Information regarding investment services are provided solely to gain an understanding of our investment philosophy, our strategies and to be able to contact us for further information.

 

Market data, articles and other content on this website are based on generally available information and are believed to be reliable. AGP Franklin does not guarantee the accuracy of the information contained in this website. The information is of a general nature and should not be construed as investment advice.

 

Please remember that it remains your responsibility to advise AGP Franklin, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.

 

AGP Franklin will provide all prospective clients with a copy of our current Form ADV, Part 2A ("Disclosure Brochure"), Form ADV Part 2B, which is the Brochure Supplement for each advisory person supporting a particular client, and the Form ADV Part 3 (Client Relationship Summary or Form CRS). You may obtain a copy of these disclosures on the SEC website at http://adviserinfo.sec.gov or you may Contact Us at (615) 778-9842 to request a free copy via .pdf or hardcopy.
 

Privacy Disclosures

AGP Franklin is committed to safeguarding the use of personal information of our Clients (also referred to as “you” and “your”) that we obtain as your Investment Advisor, as described in our Privacy Policy.

 

AGP Franklin does not collect personal non-public information through this website; however, the Advisor may collect information from you on application forms, agreements, profile or investment policy statements, and other documents received or processed in relation to services we provide. We also may collect information from other sources.

 

We do not respond to "do not track" requests because we do not track you over time or across third party websites to provide targeted advertising. We may track you across our website to help us improve our content.

 

We may use "cookies" and similar online technologies to keep, and sometimes track, information about you regarding your usage of our website. Cookies are small data files that are sent to your browser or related software from a Web server and stored on your device. Cookies help us to collect information about your usage of our website, including date and time of visits, pages viewed, amount of time spent on our sites, or general information about the device used to access the site, such as the browser used. You can refuse to store or delete cookies by configuring your web browser settings. Most browsers and mobile devices have their own settings to manage cookies. If you refuse a cookie when on our website, or if you delete cookies, you may experience some inconvenience in your use of our website, such as having to re-configure preferences.

 

When you are on this website you may have the opportunity to click-through to other websites, including websites operated by unaffiliated third parties. These sites may collect nonpublic personal Information about you. We do not control sites operated by these entities and are not responsible for the information practices of these sites. This Privacy Policy does not address the information practices of other websites. The privacy policies of websites operated third parties are located on those sites.

 

For a copy of the AGP Franklin Privacy Policy, please click here.

bottom of page