In the short run, the sheer disruption of the sudden lockdown advocated by the health experts is going to send both demand and prices plunging. . .
But then, like a tsunami wave, trillions of dollars of Federal Reserve funding and Treasury payments to individuals and businesses will finally come roaring onto shore. Demand should soar for all sorts of goods and services that the global economy is too disrupted to provide in quantity. The most likely outcome: A new era of rising prices like we have not seen since the 1970s.
My thoughts:
1. Right now, we are laughing at the people hoarding toilet paper. But wait a few years. When toilet paper is $50 a roll, we’ll see who’s laughing.
2. The “stimulus” is injecting new money and money-substitutes (I’ll just say “money” from now on) in the economy amounting to 20% of GDP. Since GDP isn’t going up, that is 20 percent more money chasing the same amount of goods. So prices ought to rise by 20 percent at some point.
3, But it doesn’t stop there. Inflation is a social and psychological phenomenon. At some point, people lose the belief that money and government securities are a store of value, because their value is eroding quickly. When that psychology kicks in, what do you do? You try to get rid of financial assets as fast as you can and buy toilet paper. By which I mean all kinds of stuff.
4. When everybody tries to trade financial assets for stuff, what happens? The price of stuff goes up. In other words, the fear of inflation becomes self-fulfilling, causing more inflation. In monetary jargon, the velocity of money goes up.
5. Supposedly the Fed will know how to stop the inflation virus before it causes much damage. But viruses seem to have a way of eluding the government agencies that are supposed to stop them.
Have a nice day.
I’m not coming at this question with a lot of econ expertise.
At the moment, the markets seem to think large amounts of inflation is unlikely (for example m, https://fred.stlouisfed.org/series/T10YIE), yet I find your points above intuitively convincing.
Are the markets wrong in your opinion? If so, what are market participants missing?
Ontario’s Premiere Doug Ford talked about the toilet paper situation over a week ago. At a minimum, Canadians will be able to supply Americans with an almost unlimited amount of paper products for the foreseeable future as long as the supply chains remain open. If you search Wikipedia for “Canada–United States softwood lumber dispute” you will see that the crux of the issue is that Canada is made up mostly of an immense boreal forest (softwood) that is “Crown Land”, that is, owned by either Federal or Provincial governments. The American lumber industry objects to the Canadian practice of offering a low “stump cost” to logging companies. I don’t know how you price natural resources that require the construction of roads and other infrastructure to gain access.
In North America, I am guessing that the commodity price of pulp and softwood lumber will remain low after this Total War against COVID-19 is won, and even during the war if the supply chain is allowed to address the need.
Interestingly the USA is exporting its soft wood to Europe where it is burned as “green” energy: http://biomassmagazine.com/articles/16667/usda-us-wood-pellet-exports-top-550-035-tons-in-october
Just as the Europeans deforested much of the tropical world for “green “ palm oil, now they are deforesting the SE USA. Combined with the massive deforestation in the USA to accommodate heat retaining solar panels, the “green” contributions to climate change are offsetting the longer term cooling trend in the USA.
In response to my comment exactly one week ago today predicting World Economic Collapse, commenter Sightline took me to task and bet that copper price by 5pm on the 23rd would not collapse. He was right.
After Sightline’s comment, I started thinking about Adam Smith and his discussion about “corn” (i.e. grains) in the Wealth of Nations. Remember that the Spanish exploitation of Peruvian gold and silver caused century long inflation which forced Smith to look for a meaningful substitute for gold as a reference of value. Corn prices, for Adam Smith, were the first CPI (Consumer Price Index) with a basket of 1 item.
The “Conversion” Kling previously wrote about is real. The economic Recalculation Kling previously wrote about will be the largest in history. The Inflation Virus is real and we should be thinking about Milton Friedman’s Monetarism and the “money supply”. Currently, the value of money is unknown.
We need a new COVID-19TotalWar CPI that includes items like N95 masks and a postTotalWar CPI that includes essential items like toilet paper.
“Exploitation” was the wrong word. I meant “Extraction”. I am not against the extraction of natural resources. Fossil Fuels should be celebrated.
Corn prices, for Adam Smith, were the first CPI (Consumer Price Index) with a basket of 1 item.
—–
My first choice was a loaf of bread. But I changed to the casual shoe. There is one money bill, the Casual Shoe. On target, the Casual Shoe bill will trade for the median casual shoe in most markets.
Why the casual shoe? We buy them every six months, two quarters. Just enough time to get a fix, and we all buy them, anyone you know that goes barefoot?
Arnold:
I’d recommend you re-think your assertions here. And I’d STRONGLY recommend avoiding the hyperbole/colloquialism/cliche-laden tripe like this Mandel “article”.
As an economist, YOU KNOW (or should know) that one-off Government largess payments, or even one-off (non-“permanent”) tax relief measures DO NOT result in inflation. In EVERY instance of this sort of one-time exercise in the past, the measured result is that recipients deploy the windfall gain predominantly to personal debt reduction. Sheesh.
The only way this sort of thing results in $50 toilet paper in a few years is if the Government continues this $1,200 giveaway every month in perpetuity – the UBI phenomena.
Get a grip, Arnold. And avoid this crap. Something we could all use right now, in addition to toilet paper, is REAL ECONOMIC THOUGHT!
It is not a one off. It looks an awful lot like our regularly scheduled bailout took advantage of the virus. And even if it once a generation, then it really is every generation, that time is also arrived.
Repeatble sequences, always on time, if there was no virus we would invent one. There is no stimulus. In reality, there is only a one quarter delay in negotiating losses, there is no other, this is a Nash equilibrium, we all know the cost, we all expect to pay our share, we are ready to negotiate, there is no place to hide. The costs immediately due from everyone, including taxpayer, next quarter. Government cannot change that.
You need to own or rent real estate to store the stuff you are hoarding . This is uneconomical which is why some people like gold and Bitcoin. These are just winning plays in the short term if at all. Long term if people worry about bonds then more gold will get produced and Bitcoin might lose value even as it’s price goes up. For example if the Bitcoin price rises 10% but the dollar index drops 20% then Bitcoin has lost value. Will the dollar index always drop? No, but since all the currencies lose value Bitcoin can still lose value even if the Bitcoin price increases while the dollar index goes up.
I think the labor cost to provide comfort, health, and leisure is dropping because of technology. It doesn’t matter if there is slow innovation because information isn’t being destroyed. As long as it’s not destroyed then there is only progress. I don’t actually believe in slow innovation because the economic value of innovation cannot be measured because of quality changes.
(When I say health is getting cheaper, I mean real health, not scam hospital bills and pharmaceuticals that produce only small benefits.)
If the labor cost of comfort is dropping we don’t have to hoard stuff.
I’ve been hearing apocalyptic inflation warnings based on govt. overspending at least since Reagan. And yet while federal debt rises, the Federal Reserve has struggled to maintain its 2% inflation target, and at times has even warned of deflation. Thus I find it hard to take such warnings seriously. In my lifetime runaway inflation has happened not in market economies, but under dictatorships of various types, in which dictator and family were siphoning national wealth into Swiss bank accounts. I consider the present situation as a “natural experiment.” The US government has now abandoned even the pretense of fiscal responsibility. We’ll find out to what extent that causes inflation.
If money is used to pay rent or mortgages, who does it lead to inflation now? Is the price of rent going to increase in the short run because the government added money to the economy.
Of course, part of the answer to inflation may be to increase taxes after the pandemic ends.
If my income is $50,000 and stays the same, as do all prices, but my taxes go up $2,000, I now have 4% less purchasing power. As far as I’m concerned, that’s 4% inflation.
If you’re worried about inflation, go buy TIPS. They are expecting inflation to average well below the Fed’s 2% target over the next 5 and 10 years.
For example, TIPS are pricing below 1.0% CPI over the next 10 years and 0.5% over the next 5 years. The Fed targets 2% PCE, which tends to run 30-40 basis points below CPI. So the market is expecting the Fed to drastically miss the 2% PCE target over the next 5 and 10 years.
Your point seems well taken. But if it is valid, why didn’t inflation become a problem after the 2008-09 stimulus, which was bigger as a percentage of nominal GDP?
Todd:
See my comment above – and then look at Fed data on Household debt level drop during and associated with the 2008-09 financial crisis to answer your question. The Fed Household Debt level drop you’ll see was from a peak of about $14 TRILLION at the peak in late 2007, to a trough just over $12 TRILLION in early 2009. Households dumped almost $2 TRILLION of effectively personal debt in less than 2 years.
The upshot is: The assumed ignorant “general public” is VASTLY more PRUDENT than most of the “elites” give them credit for. In times of even suspected economic uncertainty, the “public” generally first responds by reducing their debt levels – their primary risk exposure.
And historically, the “general public” recognizes a “one-off” government “handout” when it sees one, and also invariably uses it to reduce personal debt levels, rather than “bid up prices” OR take on new debt/investment. ALWAYS.
It is only perceived “permanent” tax reductions/handouts that can have any possible general inflationary effect whatsoever – and even that is rare. More often, a perceived “permanent” tax reduction/handout has the effect of encouraging investment (most generally, mortgage investments).
Shayne, it is also clear that hyperinflation occurs in developing economies when an autocrat gains control of printing money. Is the difference the one-time-shot vs. continuous increase alone or are other factors at play?
Yes. Capitalism is ABSENT in those hyper-inflated economies.
A further reply, RAD.
The commercial banking sector alone went into this “crisis” with around $1.4 TRILLION in EXCESS reserves.
Couple that fact with the TRILLIONS that have been removed from the equity markets in the last two weeks, and REDEPLOYED in (primarily) the Government debt markets …
… and then ask yourself if you really think the Fed is going to have to “print up” an inflationary/hyperinflationary level of NEW MONEY in order to cover this new $2.2 TRILLION Government debt/spending authority.
Do you really, actually believe that?????
Shayne, my question was an honest search for the underlying factors. Your second explanation is a good one and fits with my naive understanding of Friedman’s Monetarism though I don’t really understand whether increasing increasing federal debt impacts the money supply or not. Now is probably not the time to self-learn macroeconomic theory.
Apologies, RAD, if I sounded glib or curt in my first “absence of capitalism” response to your question. You and I have had “conversations” here before, and I’ve never known you to NOT ask honest questions.
See: I Pencil, by Leonard E. Read for an explanation as to why I responded as I did.
As far as “self-learning macroeconomics” right now, I would advise you not to bother. Even Arnold knows the current state of the utility of conventional macroeconomic theory/wisdom is “impoverished”, to say the least. So boning up on macro theory right now won’t serve you well. And I suspect Arnold would agree.
If you’re looking for something relevant to study in order to better understand what’s really happening now – AFTER reading I Pencil – I’d recommend Money and Banking, by Frederick Mishkin. An older (cheap) edition will do, by the way. I both studied from it and taught from it at college level.
[Note: Any number of Rothbard adherents out there in libertarian blogland are going apoplectic right now, that I should even mention Mishkin. Sorry, I’m a devout Capitalist, so I can’t stop myself.]
But I’d also recommend you read my comment to “Vladimir” below. Especially the part about “this hasn’t ever happened before”. That is critically important because there is no “theory” or “playbook”, metaphorically speaking, as to the one optimal way of working our way through this. There just isn’t one.
But I can tell you unequivocally that this example of Mandel’s (and others’) hyperbolic drivel has far greater harm potential to society and the economy than anything that either the financial system OR the government OR the virus can conjure up.
Thanks for your response, Shayne. I have read Leonard Read’s “I, Pencil” several times and found that I had already embraced the message so the first reading was preaching to the choir. I have also read The Pencil: A History of Design and Circumstace by Henry Petroski which is the flipside of the “I, Pencil” coin. Economists seem to lack an interest in the nitty gritty details of how the underlying artifacts that contribute to “I, Pencil”. I try to bridge these two sides but I’m not very good at it.
I agree with your assessment that “this hasn’t ever happened before” and I’m trying to get my head around a general Fermi Model that accounts for the hyperinflation style case, which I think occurred in capitalist systems historically, and the no-inflation 2008 bailouts. It sounds goofy, but I think there is true value in the lessons of Adam Smith and his use of Corn Prices as a measure of value. The value of products changed drastically on 3/13. There is also truth in Kling’s observation about Recalculations. We are in a temporary Total War economy.
Let’s issue 100 year fixed rate bonds now!
Inflating our way out will be welcome.
So the rich will see the real value of their assets destroyed. Boo hoo.
Hopefully we won’t devolve into socialism.
Oh wait, we just did that with the cares act.
We need $20 triilion
$10T for infrastructure
$6T to bring more mfg back to US, including robotics and 3d printing spends.
$2T for biotech and quantum computing.
$2T to put a woman on mars before the end of this decade. $2T is just a downpayment.
100% tarrifs on items that should be made here.
Vat tax to pay for it, with rebates to ” poor ” people
Allow STEM immigration and people who start businesses.
I have more but this is a start.
“When everybody tries to trade financial assets for stuff, what happens? The price of stuff goes up. In other words, the fear of inflation becomes self-fulfilling, causing more inflation. In monetary jargon, the velocity of money goes up.”
Right. But, the opposite is happening now. The Fed did not just spontaneously decide to loosen for no reason. People are hoarding money and treasuries and the demand for money, if not responded to by the Fed, would lead to deflation. 30-yr inflation swap rates fluctuated between 1.80% and 2.00% before the present crisis, plunged to 1.08%, and now have rebounded to 1.40%-1.60% over the last week and a half.
Flip Kling’s argument around. Suppose, we were presently in an inflationary spiral where “everybody tries to trade financial assets for stuff”. Would Kling say that the Fed should not tighten because doing so might cause massive deflation in the future?
If one is driving a car on a straight road and jerks the steering wheel to the left, then one will indeed fall off the left side of the road. If the road is turning to the left, however, then one must steer left to stay on the road. The Fed is just responding to the bends in the road.
Draft Rep. Thomas Massie for President! Now!
Two scary thoughts:
(1) Until now, my response to people fearing hyperinflation — or any other disastrous scenario in the near to medium term, for that matter — was to dismiss such fears because prices in financial markets indicate an extremely low probability of such an event. (Meaning that people much smarter than me have concluded that there’s nothing to worry about, and bet their fortunes on the correctness of this conclusion, so it would be silly for me to think I know better.)
However, with COVID-19, we saw a spectacular failure of financial markets to account for a looming disaster. It was completely ignored, even long after we’d already had clear and public evidence that its probability was far from negligible. So now one faces a disturbing question: what other awful future threats are there that the market is happily ignoring?
(2) In the usual financial panics, the government injects money to prop up financial assets whose value is collapsing due to factors intrinsic to the market, not a real shock. (A real shock may be the spark that ignites the panic, but it’s minor compared to its greatly amplified effect due to financial markets switching to a new Nash equilibrium.) In a sense, the money is provided in response to a collapsing money multiplier, leaving the price level stable. Of course, there are Cantillon effects benefiting special interests, but still, in the aggregate we end up with a similar effective amount of money chasing a similar amount of goods, so that inflation remains low. That has certainly been the experience of recent financial panics.
But now, unlike in previous market crashes, we have a real wealth-destroying shock as a first-order factor. Meaning that unlike in regular panics, I can imagine the injected money chasing a greatly diminished amount of goods, with high inflation and perhaps hyperinflation to follow.
I am not at all confident in this analysis, but while in the past I’d readily dismiss it as blatantly contradicting the market expectations, given the above observations from (1), I don’t see it as totally implausible either.
Vladimir:
Let me see if I can UN-scare you a bit.
In your point (1) above, you state: “…a spectacular failure of financial markets to account for a looming disaster. It was completely ignored, even long after we’d already had clear and public evidence that its probability was far from negligible.”
There are two (possibly three*) prominent flaws embedded in your statement:
Flaw 1. ) The financial markets DIDN’T fail. In fact, they performed spectacularly well, precisely as they should, and precisely as they are designed to perform.
The stock market sell-off, while dramatic, both in scale and rapidity, is exactly what the financial markets are supposed to do when new and unanticipated uncertainty is introduced – that can or will dramatically alter prior equity risk assumptions. The money that came OUT of the risk-exposed equity markets was re-deployed almost immediately into low-risk and “risk free” (Treasury) bond markets. Precisely as it should. Check the Treasury Bill/Note/Bond prices/interest rate trends occurring simultaneously with the S&P 500 sell-off.
THAT is exactly what should happen and is supposed to happen in financial markets when new and dramatic uncertainty is introduced that is KNOWN to affect risk profiles and exposures. The leading element “sellers” in equity capital markets when something like this occurs are (at least) pension fund managers (think CalPers, CalSters, etc.) who have a fiduciary and statutory obligation to shift from “capital appreciation” mode to “capital preservation” mode IMMEDIATELY when risk profiles change.
Not at all difficult to understand.
The “spectacular failure…” you note was in fact a spectacular success – precisely because it was large scale, rapid and ORDERLY! There was no “rout” as happened in 2008.
Flaw 2.) You’re claiming that there was early and clear “evidence” that COVID-19 impacts would be far from negligible. I’d argue, first, that there is no CLEAR evidence of the actual/final health impacts of COVID-19 even now. But that is beside the point.
If you are referring to the economic impacts of the virus and COVID-19, and that THOSE should have been anticipated by the financial markets, I’ll might even agree with you. But that again is far from the larger reality.
There are TWO OTHER economic impacts that you don’t discuss that the financial markets couldn’t have anticipated: a. Government mandated economic shutdown, and b. The simultaneous Oil feud between Saudi and Russia* (began March 7). That second is something neither you nor many of the other commenters have even mentioned. And I’m confident the onset of that oil feud alone would have shaved 25% off the S&P 500 all by itself, completely absent COVID-19.
I’ll be turning 66 tomorrow, and I’ve been investing and participating in financial markets for almost 50 of those 66 years. I’ve seen hot wars, cold wars, oil wars, flus, epidemics, Presidential impeachments, Presidential resignations, governmental mismanagement, corporate mismanagement, and a whole variety of other phenomena and how they affect financial markets. What I have NEVER seen before is how Government mandated economic shutdowns affect financial markets. Neither has anyone else. THAT has never happened before. So assuming the “financial markets” and their “wizards” should have anticipated all of this is a bit naive.
I would encourage you to take a step back, consider this, and get yourself a whole lot less scared. I’m frankly amazed at how well, and orderly, the financial markets are working right now. Very amazed.
I think the key features of this epidemic are that:
1. Everyone expects the extraordinary impacts to be temporary and for things to more or less return to normal afterwards. There will be some volatility in production and consumption as hoards are used up on the one hand and other production has to surge to “make up for lost time” to remedy various shortages. For example, car sales are down a huge amount, and some assembly lines are being temporarily retooled to build ventilators, but there will be a compensatory spike in production and sales after the “all clear”. It’s not like the demand for or rate of use of toilet paper is going to change. Most production operations have enough slack capacity to surge for a little while if need be to restore the pre-existing equilibrium.
2. No physical capital will be significantly impaired, and my guess is that the total loss of human capital vs. the counterfactual will be, mercifully, relatively minor. Most of the premature deaths are among people who are retired or near-retired, so if one takes “aggregate salaries” as a proxy for human capital (that is, leave out transfers, pensions, capital gains, and so forth from ‘income’, and ), I don’t think it will decline that much. Indeed, while I admit this is a highly sensitive topic, the result may be some mild improvement in the financial position of entities providing payments to the elderly / infirm. A similar point was made I think by Campos who said that the war against cigarettes had the unintended consequence of creating major costs elsewhere in the health system, of both making people fatter and more likely to need treatments associated with obesity, and adding more expensive years to the end of life. I think the situation in particularly old countries that were hard hit (e.g., Japan, Italy) might be paradoxically beneficial to the public fisc, as the destruction caused by the virus has a bias towards liabilities over assets.
3. A huge amount of wealth is in the form of real estate, and the underlying basis of the market value of these assets in unlikely to be affected by a several-months-long pause in normal economic activity.
4. So, in the big picture, what’s really been lost is the time of production of certain services which are hard to make up or substitute with telework. True, people may do more tourism and travel and events later to make up for the lost time. But there are some sectors where the supply is inelastic and so there is a congestion problem with a post-bust boom, and I think airlines provide a good example. Though, even there, if there is increased demand for travel, then prices and profitability could still rise temporarily until restoration of equilibrium.
5. While arguments relying on the logic of “Ricardian Equivalence” are not much in fashion, the massive debt binging will have to be made up one way or another, by more taxes or more money printing, and my guess is we’ll get a combination of both. Since “The Monetary Authority is the Last Mover”, it has some ability (certainly not infinite!) to nudge the proportion in the direction of a low and stable inflation rate, which will tend to reinforce the self-validating social psychology underpinning the perceived value of the currency.
The demand for toilet paper is price inelastic.
Think of the economy as two sectors: a sector that supplies essential goods and services and its workers, and a sector that supplies nonessential goods and services and its workers.
Right now, the workers in the nonessential sector do not have the income to purchase essentials. When we give them money, we are allowing them to maintain their previous level of demand, not add new demand. As such, there is no inflation here, assuming supply is not restricted.
As for the nonessential sector of the economy, the supply has contracted but so has the demand. Think restaurants here. We are not supplying restaurant dinners, but we are not demanding them either on account of isolating ourselves. Supply of food that would normally go to restaurants will now end up in supermarkets instead. We’ll still get our food but without the ambiance. So no problem there.
As for supply, if supermarket workers get sick, we can always bring in workers from the nonessential sector, so supply should hold up that way. Or think of dentist’s offices doing fillings and teeth cleanings. If dental workers are in short supply on account of sickness, we’ll forgo cleanings for more fillings and get by that way.
Inflation topped 15% for a couple of quarters in the early 80s, 8 years after the Nixon Shock.
Treat the virus shock as history rhyming, twice. The Roosevelt Shock is still recent memory.
I don’t see hyper inflation, I see bean counters reading my previous sentence and saying, ‘yes, been there done this’. We have a low bar, do it a bit better than Nixon, is that so hard?
Financial markets globally expect lower inflation.
Since 1980, each recession has generally led to lower interest rates and lower inflation in the developed world. This recession is sui generis however.
Both Martin Feldstein and Paul Volcker spent decades, multiple decades, warning of impending higher inflation. Smart knowledable observers.
Japan should have inflatiom. Instead it again is on the cusp of deflation.
Orthodox macroeconomics seems to misfire on the inflation topic.
I hope ASK revisits this topic annually on this day for analysis.
I get the impression that many people are still overestimating the extent to which this is going to be a sustained crisis. If anything the failure to control it in major cities like New York means, unfortunately from a fatality rate standpoint, it will be much more acute and quicker. In New York the number infected will probably peak by the end of April (perhaps at half of the population. By summer it will be well in decline. The status quo isn’t ‘the new normal.’ It’s going to be a rough two months or so for New York, but after that the acute phase will be over, and though there will probably be recurrent local waves over the next couple years before vaccine and antiviral use is widespread, the first outbreak against a ‘virgin population’ of a novel virus before it has experienced any symbiotic coevolution with its host is generally by far the worst wave. In a few years I’m confident toilet paper production will be robust enough to satisfy demand at reasonable prices.
I don’t think it works that way with this disease, Mark. This disease doesn’t burn through the population, it burns through the health system. If you assume that disease primarily spreads through symptomatic carriers then full compliance with strict Self-Monitoring and Self-Isolation can stop the growth in four weeks; the best case scenario. The Canadian Epidemiology Summary and Detailed PDF released today shows good success based on the symptomatic carrier assumption. Symptom Onset, rather than Test Confirmation Date, is the best data point to use for this type of analysis.
I must have messed up the link: Canadian Epidemiology Summary and Detailed PDF.
Demand should soar for all sorts of goods and services that the global economy is too disrupted to provide in quantity.
Throughout history, there has been “too little capital”. There have been many investment possibilities with high ROIs. But has it been easy, lately, to find projects with high Returns on Investment?
I don’t think that’s now the case. If demand soars in almost any area, there will “rapidly” (2 quarters? 4? 1?) be increased supply, including with US based shortened supply lines. Yes, at higher prices. But 10-20% higher of specific components, not total higher.
There’s a LOT of talk about how fragile the highly tuned, globally optimum supply lines are. Like for drugs. Yes, they’re fragile in the sense that for a $10 drug, $5 wholesale cost, $2 of Cost of Materials, there might be a disruption of some $1 material which will cost 50% more.
So, $1.50 instead of $1; $2.50 instead of $2, $5.50 instead of $5, and $10.50 instead of $10. 50% more. But only 5% more to consumer, because most of the cost is human services.
Plus, there’s a Gas War going on – haven’t you heard? You probably don’t remember gas station Gas War signs. They sell it for $0.30/gal, we have it for $0.27/gal (~1964)
The 70s inflation included increasing gas prices, and huge numbers of “never-before” needed changes.
We will see that the various supply chains are much faster to adapt to lower gas prices (lower gas cost as part of price = lower prices). There will be some, few, supply chains where the substitution adjustments for a $10 end-user product mean the costs go up to $15, maybe even $18, but almost none going up $20 or more (100%), even tho there might well be particular inputs that go up 200% for some time.
I expect most of that $2 trillion will keep questionable businesses up; will keep banks able to lend to any projects that look good with ROI. Possibly there will be some excess investment in excess toilet paper production, but I doubt it.
Just like most Walmart / Costco / Amazon sellers have a huge (or perhaps only 1 week?) amount of inventory, there’s a lot of product in seller’s inventory, despite the “Just In Time” mfg consultant advised goals. Some of them will find their production reduced for some days; weeks? (2 or more, 10%); months? (5 weeks or more 1%).
Ain’t gonna cause big missing supply inflation. Might cause 5-15% one-year adjustment inflation, as the new supply chains get worked out; and folk adjust want they want, especially stocking up on quarantine items which so many will find they have too few of.
… so the cash makes it way into asset prices – higher housing for desirable (good schools!) places, and good stocks. Plus more share buy backs? And some to wages, but more to top 1%.