Trust you are safe! For a long time, I have been forecasting #DEFLATION. We got that! Today, I want to address, why I think we are about to see a NEW ECONOMIC REGIME arise soon - and why #STAGFLATION will be the transformation into the coming Kondratiev Spring #HZupdates

We know, that Fed and CBs around the world have been printing money - and lots of it! However, we have failed to see inflation - to the regret of Draghi, Yellen, etc. Despite their efforts, inflation has been in decline. Why? Because Velocity of Money has been in strong decline.

Two factors to create inflation: 1) Amount of money 2) Speed of circulation. The latter has been in decline for years as during Kondratiev's Winter, debt has become a burden to society - which hinders growth. The more debt - the less growth - and hence slower money circulation

The geniuses of Fed, brought up by Keynesian theory, believed, that they could bring higher growth back - every time it slowed - through Monetary stimulus. Ever since 1998, any headwind, has been meet by stimulus by Fed. To begin with - they were kings! Cheap Money created growth

However, the real burden has been DEBT - and the Monetary stimulus have had one clear consequence. More money was borrowed - to finance short term consumption - and so the Debt levels increased. By 2008, debt levels had become a huge problem - and we had a major recession

Again, Fed and CBs around the world scrambled and beat Deflation by 2009. But they found it increasingly difficult to keep growth up despite QE1, QE2, QE3, Twist etc. In their ignorance - all they did was to ENHANCE the problem as the Monetary policies only INCREASED DEBT levels

By 2020, the system was so fragile and valuations were set at perfection! QE-insanity had created the largest bubble ever! Any small pin could burst the bubble.....! And along came #COVID19 - a massive shock to the real economy - at a time where Debt levels were ~50% above 2008!

For a long time, Fed has been able to conduct their misunderstood policies - as inflation has been subdued. But this is about to change! Below, is the Velocity of M2 which has kept inflation in check. Clear Ending Diagonal - with one last spike lower - before MAJOR reversal.

For as long as Velocity of M2 has been declining, inflation will be nowhere to see. But - a major bottom is close. This implies a NEW ECONOMIC REGIME ahead, where infaltion will be rising no matter what Fed/CBs do. Last spike lower has been brought about by shot-down of societies