I suppose that when central bankers say there is no risk of inflation , they do so because they want to let it rise for a certain time, thus definitely eliminating the risk of deflation. Because it does not enter my head that they think that the inflation that we will have in the next two or three years is going to be the same as what we had before the pandemic.

In the first place, because they are the first to be aware that they have taken liquidity injections to stratospheric levels. Second, because they are perfectly aware of the stimulus plans that governments are going to put in place.

Also, being academic as they are, it is assumed that they have not missed a couple of important details.

The first, real estate prices . Curiously, in Spain it is being noticed less, but that is because Spain is in a much worse economic situation and its expectations are much worse than those of the United States or the rest of Europe.

But if we look at North America for example, the situation is striking. In a place like Ohio, where it typically takes 100 days to sell a home, it now sells for 10. And at prices far higher than before the pandemic. I don’t want to tell you in New York or California.

Obviously, these increases must be framed in the rebound in prices after the pandemic, but with important nuances. The first is that prices were already rising during the pandemic, probably due to the very favorable financing conditions that the Fed was generating. The second issue is that prices are already above what they were before the pandemic. The third is that expectations for economic growth from now on are much higher than before the pandemic, and growth is helping house prices rise.

Then there is an issue that is rarely talked about, but is no less important: the ability of the world industry to cope with a serious increase in global demand, when it turns out that all the investments made over the last 10 Years have gone to increase the capacity of the technology sector.

The goal of the flood of liquidity and stimulus plans is to boost economic growth. And no one doubts that, at least for the next two years, they will achieve their goal. A year from now, growth of around 5% or 6% is expected in advanced economies. A little less is expected in two years, but clearly above pre-pandemic levels.

When the economy grows, consumers consume. And they not only consume technology or software, they also buy “things”, that is, physical goods, such as a car or a washing machine. Goods that are made from industrial products, which in turn are created using raw materials.

The problem with industrial production is that, to increase it, you need to expand factories. Or create new factories. As in the last 10 years the vast majority of capital has gone to technology businesses – looking for “unicorns” ?? , technology is ready to cope with an increase in demand, but the industrial sector is not so ready. And as long as demand is greater than supply, manufacturers can raise prices.

It could be argued that China is capable of meeting any industrial demand in the world and it would be true. But it turns out that another characteristic of the new scenario is a higher level of protectionism, especially against China. Of course, Western governments do not want their stimulus plans to end up benefiting only Chinese companies, because then it is China who grows.

Something similar happens with raw materials. The production capacity of a mine is not expanded like someone who creates an app. As with industrial supply, it takes time for a mining operation to be in a position to meet the demand that generates further growth.

By this I do not mean that inflation is going to increase a lot , since the digital revolution and globalization will act as a brake, but it would be very innocent to think that during the next two years we will have the same level of inflation as in the previous two years to the pandemic . And if central banks don’t want to see it, or political pressure prevents them from recognizing it, investors should.

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