As President Joe Biden commits to $6 trillion of stimulus over the next decade, worries of inflation, or even hyperinflation, from both unprecedented monetary and fiscal stimulus take center stage in financial headlines.
Fiscal stimulus from the Biden Administration includes the $1.8 trillion American Families Plan, the $2.3 trillion American Jobs Plan and the $1.9 trillion American Rescue Plan.
Michael Lee, founder of Michael Lee Strategy, said that these hyperinflation fears are overblown, because the velocity of money simply isn’t there.
“I don’t think, in the U.S., we’re going to have meaningful inflation ever again. We’ve Japanified our country. What you’ve done through the endless printing of money, it hyperinflates financial assets, and it crushes the velocity of money through the system. It’s the velocity of money, in my opinion, that is the key driver of inflation,” Lee told David Lin, anchor for Kitco News.
Inflation right now is not going to persistent, Lee said.
“I am in total agreement with Jerome Powell that most of the inflation issues we’re seeing right now are transitory. There are serious supply issues that are pandemic related that will pass. As these things pass, as suppliers and commodity miners and manufacturers, can match supply and demand, because there is a demand surge right now…once that levels out, a lot of that price inflation is going to go away,” he said.
Lee added that the U.S. is headed towards what Japan was in the 1990s, instead of what Zimbabwe experienced when they hyperinflated.
On financial assets, Lee remains bullish on equities.
“You end up just pulling stock returns, you depress bond returns, you crush savers, and you pull stock returns forward. I’d say the stock market is going to go crazy until the money stops printing,” he said.