US Treasury Secretary Scott Bessent points to higher inflation

[Abiky]

Is that  true? Don't  you find it weird? Gold is also considered the best hedge against inflation and its price has hit record highs since the tariff war began. But why has the price of bitcoin been falling steadily for the past two months since hitting $109k the month Trump officially became president? This makes me wonder if bitcoin is really an effective inflation hedge. Are people buying it more than selling it? If  people see it as a hedge against inflation and are converting fiat to bitcoin, its price will rise with gold, not fall with  stocks.

Why? Because the world is not yet ready for Bitcoin. It's still in its early days. Gold, on the other hand, is a tried-and-tested store of value that's been around for centuries. Bitcoin is only 16 years old. So it's going to take quite some time before it becomes mature enough for the world. Right now, people are only into Bitcoin to get rich quick. That mindset will change in the long run as investors take it more seriously.

For what I know, intangible assets are the future (digital currencies, NFTs, etc). It won't be long before Gold becomes history. Once Gold loses investor appeal, it will remain a metal solely used for jewelry and electronics. The tariffs are negatively impacting Bitcoin's price because the crypto market is too tied with the stock market. Volatility is still at large, so don't expect things to improve anytime soon. Once the market is stabilized and Bitcoin is recognized as Gold's replacement, such negative events won't affect prices within the short term. BTC will go up just like Gold. Have a little faith in it for once, will ya?

[davis196]

Best case scenario, we just climb the wall of worry and the rally continues, but looks like the talking points of a soft landing that was being achieved are not there anymore, so if there is a hard landing, a crash is going to happen sooner or later, which again leads us to think if this is going to be frontrun and therefore there will be no "wall-of-worry-climbing" type of final blowoff top. Im personally holding relevant amounts of cash but I still have some exposure to the market in case that happens.

Do you live in the USA? Holding cash in times of growing inflation seems like a bad move.
I don't have a crystal ball and I don't know what's going to happen. Maybe somebody will convince Trump to change his approach. Maybe the Senate and Congress will block the high tariffs. If those tariffs stay for more than one year, the US economy is going to have a problem. The higher level of inflation would force the Federal Reserve to raise the interest rates, which would hit the borrowers and almost all businesses. This would cause stagflation in the USA, and I don't know if the EU, China and other countries are planning to ban the export of capital to the USA.

[DanWalker]

Do you live in the USA? Holding cash in times of growing inflation seems like a bad move.

With what is happening in the financial markets, stocks are red, bitcoin is red, only gold and fiat are holding their value quite well during this period. So if that's the amount of money being prepared to pour into investments, OP is probably a rare winner since most of us have invested all our money in the market.

I don't have a crystal ball and I don't know what's going to happen. Maybe somebody will convince Trump to change his approach. Maybe the Senate and Congress will block the high tariffs. If those tariffs stay for more than one year, the US economy is going to have a problem. The higher level of inflation would force the Federal Reserve to raise the interest rates, which would hit the borrowers and almost all businesses. This would cause stagflation in the USA, and I don't know if the EU, China and other countries are planning to ban the export of capital to the USA.

Rather than thinking that Congress will find a way to stop Trump or that the Fed will raise rates, I'm betting that the Fed will have to cut rates soon. The tariff war is threatening to push the US economy into recession, and that's what the Fed fears more than anything else.

Trump is using the economy and financial markets to pressure the Fed to lower interest rates because the economy cannot grow if interest rates are kept high for too long. That's why he keeps reassuring people that what's happening is temporary and urging the Fed to lower interest rates. But whether he can succeed in pressuring the Fed remains to be seen.

[STT]

Its the persistence of the inflation that matters more I think, if the prices only rise for a month its not quite the same concern as a permanent shift in pricing across a market that reflects a lower value in the currency.   An iterative effect which leads from inflation to higher wage rise demands and feeds back into more inflation would be where a central bank becomes most concerned.

Government is the main original source of inflation because they never reverse their creation of new money.    If people sold government bonds excessively that could release prior inflation that had been withheld within that prior QE program but bond prices have been going up so I presume thats not too much of a worry for now.

[The Sceptical Chymist]

It is also interesting to think what the US10 yield is going to be doing from now on. It seems like was falling down, but wouldn't it go back up if inflation fears are there again? Or has this been priced in already?

At this point, who the hell knows?  It seems like all the markets are in a state of chaos and confusion because of Trump and what he's done, what he says he's going to do, and speculation as to what he's really going to do.  I don't think the big trading firms know what to think--and for good reason.

I've been watching US inflation for the past few months, and it looks like it's vacillating around 3%.  New data comes out on 4/10, and it'll be interesting to see what's reported.  Meanwhile, I guess there's a push to lower interest rates earlier than expected.  I've been slapping my head after reading financial news so often that people are starting to wonder if I've joined Fight Club.  But yeah, why wouldn't there be higher inflation with the crazy fiscal policies the US government has implemented?  A better question would be why inflation seems to be coming down since 2022.  That one really baffles me.

[DeathAngel]

I like Bessent, Trump needs to make him the main voice heard by the media. He is much calmer & doesn’t spook markets. He has a storied career & knows how to work under real pressure. I do not like Lutnick, I feel he’s a bit of a charlatan. Hopefully we are close to reductions in tariffs worldwide & continuation of the bull market.

[RockBell]

Do you live in the USA? Holding cash in times of growing inflation seems like a bad move.
I don't have a crystal ball and I don't know what's going to happen. Maybe somebody will convince Trump to change his approach. Maybe the Senate and Congress will block the high tariffs. If those tariffs stay for more than one year, the US economy is going to have a problem. The higher level of inflation would force the Federal Reserve to raise the interest rates, which would hit the borrowers and almost all businesses. This would cause stagflation in the USA, and I don't know if the EU, China and other countries are planning to ban the export of capital to the USA.

and the issue of inflation is now a global problem a lot of presidents are not using the right approach to tackle this issue because when you look at the whole situation you will need more approach than what they think and if people are not really happy with the kind of decision they are making thinking they are doing it for the people and the senate are the only one that can block whatever the decision of the president might be. and the issue of increase of tariff will only bring high cost of things.

And the economy of things are going to be high because I don't even know what these people are thinking and the cost of things for consumers will definitely increase and there is a chance that people will lose their jobs because a lot of companies will not be able to keep up so the disadvantages are even more that the advantage and to me it is not even advantage because something that people will not benefit from is not a good one.

[Abiky]

Do you live in the USA? Holding cash in times of growing inflation seems like a bad move.
I don't have a crystal ball and I don't know what's going to happen. Maybe somebody will convince Trump to change his approach. Maybe the Senate and Congress will block the high tariffs. If those tariffs stay for more than one year, the US economy is going to have a problem. The higher level of inflation would force the Federal Reserve to raise the interest rates, which would hit the borrowers and almost all businesses. This would cause stagflation in the USA, and I don't know if the EU, China and other countries are planning to ban the export of capital to the USA.

Even if Congress approved the bill to block Trump from imposing additional tariffs, it would still require the President's signature to become official. I highly doubt Trump will sign such a bill. Inflation will happen whenever we like it or not.

Hopefully, the effects are short-lived as the US ramps up domestic production. Companies might decide to move their factories to the USA to save money. Or in a surprising twist, EU takes the reigns as the world's leading economic powerhouse by strengthening its relationship with China. The US will be isolated, while the rest of the world carries along as usual. These are uncertain times we're living into, so expect the unexpected.

[takuma sato]

Do you live in the USA? Holding cash in times of growing inflation seems like a bad move.
I don't have a crystal ball and I don't know what's going to happen. Maybe somebody will convince Trump to change his approach. Maybe the Senate and Congress will block the high tariffs. If those tariffs stay for more than one year, the US economy is going to have a problem. The higher level of inflation would force the Federal Reserve to raise the interest rates, which would hit the borrowers and almost all businesses. This would cause stagflation in the USA, and I don't know if the EU, China and other countries are planning to ban the export of capital to the USA.

Even if Congress approved the bill to block Trump from imposing additional tariffs, it would still require the President's signature to become official. I highly doubt Trump will sign such a bill. Inflation will happen whenever we like it or not.

Hopefully, the effects are short-lived as the US ramps up domestic production. Companies might decide to move their factories to the USA to save money. Or in a surprising twist, EU takes the reigns as the world's leading economic powerhouse by strengthening its relationship with China. The US will be isolated, while the rest of the world carries along as usual. These are uncertain times we're living into, so expect the unexpected.

US cannot make it without chinese imports. It's just sci-fi at this moment to pretend this is doable. It will never happen probably within Trump's 4 years. This may be doable as a multiyear plan, but democracies have changing powers, therefore by the time you start moving your factories back into the US, Trump will have to leave the Whitehouse since it's not allowed that he runs again, so his best chance is to put someone that will continue his plans, but he could get kicked out due voters deciding to go democrat, so as a businessman I may be considering this and think, "is it worth it for me to move my production back into the US only to get it all reverted as it is now within 4 years, or should I just ride this and continue to produce outside for better margins even if I have to pay tariffs"? This is what they are talking about now I think. So Trump may need to force them with even more power if he wants production back in the US fast, and even then the logistics aren't there yet.

[Abiky]

US cannot make it without chinese imports. It's just sci-fi at this moment to pretend this is doable. It will never happen probably within Trump's 4 years. This may be doable as a multiyear plan, but democracies have changing powers, therefore by the time you start moving your factories back into the US, Trump will have to leave the Whitehouse since it's not allowed that he runs again, so his best chance is to put someone that will continue his plans, but he could get kicked out due voters deciding to go democrat, so as a businessman I may be considering this and think, "is it worth it for me to move my production back into the US only to get it all reverted as it is now within 4 years, or should I just ride this and continue to produce outside for better margins even if I have to pay tariffs"? This is what they are talking about now I think. So Trump may need to force them with even more power if he wants production back in the US fast, and even then the logistics aren't there yet.

Yes. 4 years are not enough for Trump to encourage manufacturers to move to the US. The tariffs should've been implemented at a "slow and steady" rate to help prevent everything from going downhill in an instant. "Exaggerated" rates will only exacerbate the problem. Now there's a 90-day tariff pause, but I doubt things will get better in the short term. We'll have to see what happens in the long run.

If Trump is right, the US economy should become bigger and stronger by then. Producing everything domestically (in-house) will help reduce prices to American consumers. Not sure how this will benefit the world, though. We're living in uncertain times, so I'd prepare myself for the worse.

[ancafe]

To me it's clear that the US administration is already accepting that their policies are going to raise inflation to some extent. Perhaps they didn't expect nations to fight back at such degree and thought that they would simply comply, but both the EU and Canada are working on tariffs as well as China and nobody wants to settle down, this will result in higher inflation as the cost of manufacturing is increased assuming they are even able to move it all back to America in a viable way. So basically, higher inflation would mean that rates stay elevated for longer before we get a rally on risk on assets.

The question is, did Trump’s policies go through a process of review and did they ever foresee this happening? I’m sure there was a plan for this and maybe Trump deliberately made it more complicated because there was a condition where countries would create chaos as a first step that would benefit them once the phase was underway. Policy can’t be made haphazardly because they would have formulated it beforehand and tried to find a point as a way to resolve it.

I think the US can get through this and in the end Trump’s target is achieved with some chaos. It will be interesting how this plays out because I'm sure Trump is not that stupid and this is just the tariff issue because there will be other policies that may be much more controversial.