PSI

April 21, 2021 - Published by IAG Wealth Partners

Categorized in:


fef66b416a2ff689585b537d9045638d

It seems like I spend more time focusing on PSI (pounds per square inch) in spring than any other time of the year.

All of the kids’ basketballs, footballs, and kickballs that sat in the garage all winter need some air. All of the family’s bike tires need to be reinflated before the first ride of the year. The car and camper tires all need to be checked.

Until you stop and think about it, you probably don’t realize how important proper inflation is to your everyday life.

Too little inflation and you risk a flat tire or a really lame kickball game. Too much inflation and you could literally blow things up.

Thankfully, most inflatables come with guidelines that tell you the appropriate PSI for optimal performance. Unfortunately, our economy is not one of them.

Last month’s inflation figures indicated that prices are starting to pick up. The Federal Reserve and Congress have been very busy adding air [money] to the economy to create inflation, and they appear to be succeeding.

We have already seen significant inflation in specific areas of the economy – home prices, gas, used cars, and lumber. The challenge is determining when to turn the economic air compressor off.

Similar to a tire, adding too much pressure within the confines of limited economic capabilities (in some cases further restricted by supply chain issues) can result in unintended consequences.

As people begin to expect prices to rise, they tend to accelerate their purchases to lock today’s relatively low prices. This causes prices to rise by increasing current demand which further reinforces people’s impressions that future inflation could be higher.

The Federal Reserve believes any inflation pressures that develop will be short-lived and will be easily contained by letting air out (reducing their bond purchases or raising interest rates) of the economy. We will all be relying on them to maintain reasonable inflation expectations before economic PSI gets too high.

 

Quote of the week: Milton Friedman: “Inflation is on form of taxation that can be imposed without legislation.”


Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.

Past performance is no guarantee of future performance. In fact, the opposite can be true. The information contained in this report does not purport to be a complete description of the securities, markets, or development referred to in this material. Investing involves risk including loss of principal.

Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

This Photo by Unknown Author is licensed under CC BY-SA-NC

Other News Articles