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Magic money printing and the reality of inflation

Lockdown measures due to coronavirus in 2020 will lead to unprecedented falls in national output across the main advanced countries and many developing countries. The reductions may be of the order of 10-15%, perhaps even more. They must mean that the average citizen is worse off. We cannot consume something if it has not already been made.

Governments are trying to limit or even to suppress the consequences of the economic decline by running enormous budget deficits and financing them by borrowing from banking systems, particularly at the moment from central banks.

How does the financing work?

When a government borrows from its central bank, it registers a new debt – which may take the form of a Treasury security such as a bond – with the central bank. In principle, the government is supposed to repay that debt at a future date. In return for the Treasury security, the central bank credits a sum to the government’s deposit account. The government can then spend the deposit on whatever it wishes.

Since all the transactions are in the form of electronically-recorded book entries, they have no apparent resource cost. The central bank appears to offer the government a virtual ‘magic money tree’. On the face of it, abracadabra has become the key formula of contemporary economic statecraft, so that – miraculously – the coronavirus epidemic has no adverse financial implications for the government and citizens.

Believers in the gold standard may express their outrage, but they need to understand that the government can confer legal tender status on the central bank’s liabilities, such as the notes that it issues. Further, if someone refuses to accept legal tender notes in payment, that is breaking the law.

The modern world is one of legal tender ‘fiat money’, where the word ‘fiat’ is Latin for ‘let it be done’. More brutally, it is commanded from on high without further ado. In this world, the printing of money enables the state to pay for anything. Indeed, this power is practically unlimited, since the printing presses can be multiplied and instructed to print ever-higher denominations of notes.

The magic money tree and the laws of physics

Unfortunately, there is a problem here. The printing of money sounds great, but it cannot break the laws of physics. To repeat, we cannot consume something if it has not already been made. If national output drops by 10-15%, people have 10-15% less of everything to consume or invest. That constraint must apply, regardless of the gimmickry of legal tender and the printing press.

What is wrong with the supposed ‘magic money tree’? The trouble is this. When new money is fabricated ‘out of thin air’ by money printing or the electronic addition of balance sheet entries, the value of that money is not necessarily given for all time. The laws of economics are just as unforgiving as the laws of physics. If too much money is created, the real value of a unit of money goes down. 

Inflation reduces the purchasing power of a dollar, a euro or a pound, so that – in the end – if output drops by 10-15% in real terms, then so must consumption and investment in real terms.

The Federal Reserve switches on money growth

Traditionally, the USA was a bastion of sound money and strong public finances. In Latin America, dictators bullied central banks into printing money to finance extravaganzas of various sorts, leading to the crazy hyperinflations seen in nations like Argentina, Chile and Peru, and today – tragically – in Venezuela. But a worrying recent development is that, even in the USA, the public policy response to the coronavirus is leading to rapid money growth.

President Trump declared a national emergency on Friday, 13 March. Over the following fortnight the Federal Reserve, the USA’s central bank, announced a number of dramatic policy changes to help the Federal Government in the financing of its deficit.

This might be termed technically ‘monetary financing of the deficit’ or something of the sort, but in truth it is just the same thing as letting it become a magic money tree. New fiat money would be added to the economy, in just the way described above.

The Fed would also resume so-called ‘quantitative easing’ (QE), with large-scale purchases of assets (including Treasury securities) from both banks and non-banks (QE was previously used from late 2008). When the asset purchases are from non-banks, the result is an immediate dollar-for-dollar increase in non-banks’ holdings of bank deposits, which are money. Moreover, the Fed would become involved in direct finance to companies where cash flows had been disrupted by the lockdown, just as if it were a local bank.

The impact of these developments is already evident in the balance sheets of the USA’s commercial banks, which are tracked every week in a Fed press release. In the week to 18 March, deposits increased by 2.2%, in the week to 25 March by 2.6% and in the week to 1 April by 1.0%. So bank deposits – the main kind of money in a modern economy – jumped by almost 6% in a mere three weeks.

If this were to continue for a year, compound interest would cause the quantity of money to jump by roughly 175%, a truly Latin American pace of monetary growth.

Plainly, the three weeks to 1 April were exceptional. Everyone was alarmed about the short-run harm to output and employment from the coronavirus lockdown. The Trump administration was reacting with drastic and unprecedented measures to maintain spending power and to protect jobs, as well as to spend the money needed to save lives. The Federal Reserve is the government’s banker. It would have been suicidal – in terms of public relations – to have refused financial help.

The laws of economics are as unforgiving as the laws of physics

The Federal Reserve’s preparedness to finance the coronavirus-related spending may prove suicidal to its long-term reputation as an inflation fighter. Of course, the US Government will not repay its debts at the Federal Reserve while it is running an annual budget deficit of $3,000 billion to $4,000 billion. In the modern world, the state can create money out of thin air, but it cannot create new goods and services in the same way.

If too much money is manufactured on banks’ balance sheets, a big rise in inflation should be expected. The laws of economics apply without discrimination to both Latin American countries and the USA.

 

Professor Tim Congdon, CBE, is Chairman of the Institute of International Monetary Research at the University of Buckingham, England.

Professor Congdon is often regarded as the UK’s leading exponent of the quantity theory of money (or ‘monetarism’). He served as an adviser to the Conservative Government between 1992 and 1997 as a member of the Treasury Panel of Independent Forecasters. He has also authored many books and academic articles on monetarism.

 

35 Comments
Gary Judd
May 05, 2020

As a general proposition, I agree with Prof Congdon’s views about the impact on prices of increasing the money supply, but I think he has failed to take account of other factors which may exacerbate or mitigate the impact of reduced output and/or increased money supply.
Also, his emphasis was on “more dollars,” but the smaller pool of goods may be more important.
Money functions as a medium of exchange. As pieces of paper or electronic entries, fiat money has no intrinsic value. Money’s value is neither more nor less than the good or service for which it may be exchanged. That creates a direct linkage between the available supply of goods and services and money, and prices. The linkage means that if output decreases and/or the money supply increases, there will be a tendency for prices to increase.
I part company with Prof Congdon when he relies on a “law” like laws of physics. The linkages between money supply, available goods and services and prices are just that: linkages. What happens in the real world is susceptible to a vast range of influences.
Money creation and destruction
For a start, there may not really be an increase in the money supply “[when governments run] enormous budget deficits and [finance] them by borrowing from banking systems, particularly at the moment from central banks.” If nothing else is happening there will be. But money can be destroyed as well as created. To understand why, we must understand how money is created.
Although it still happens from time to time (e.g., Zimbabwe), money is not usually created by printing banknotes, but by commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in a borrower’s bank account: see 2014 article in the Bank of England Quarterly Bulletin by three members of the Bank’s Monetary Analysis Directorate, “Money creation in the modern economy,” Gillian Lawrence, writing in the RBNZ Bulletin in 2008 gives a less technical account.
The central bank’s monetary policy is the primary determinant of the extent to which bank lending, and therefore money creation, occurs. It can also increase the money in the system directly through purchasing assets or ‘quantitative easing’.
Money can be destroyed by loan repayments or bad loans written off. If a repaid loan is matched by a new loan, the impact is neutral, and the money supply remains the same. If new loans are not made, banks’ balance sheets shrink, and the money supply decreases. Bad loans written off have the same effect.
Reduced economic activity which usually occurs because of monetary or fiscal policy tends to result in fewer loans being made and, therefore, the money supply stabilising. In a recession and even more so in a depression, the money supply may decrease.
There is also the impact of depositors drawing down on savings for present consumption. Unless deposits from new loans compensate, the money in the system will diminish.
Government and central bank actions have the tendency to increase the money supply with the implication of higher prices, but the impact may be outweighed by money destruction, so there may be no increase in the money supply at all. There may even be a net reduction. It depends how severe the recession/depression is.
Therefore, right at the very outset, Prof Congdon’s thesis runs into a problem. The money supply may not increase.
Prof Congdon is probably right about price increases, but reduced output may be the cause.
Because fiat money is just a medium of exchange, creating new money does not substitute for reduced production. As Prof Congdon says, “We cannot consume something if it has not already been made” and “In the modern world, the state can create money out of thin air, but it cannot create new goods and services in the same way.”
If there is a net increase in the money supply and production expands to soak up the new money, there will be equilibrium and there will be no tendency for prices to increase just because of the increase in the money supply. If production does not expand but contracts, the reduced supply of goods and services will have the tendency of increasing prices even if there is no net increase in the money supply.
If there is a net increase in the money supply, the longer the present restraints on output last, the more difficult will it be for increased production to soak up any new money and the greater the likelihood and extent of price inflation.
Whilst we cannot be certain there will be a net increase in the money supply, we know that there has been a massive reduction in output and can be certain reduced output will continue for an unknown time.
Whilst economies are weak with plenty of spare capacity, price inflation could nonetheless be seen more quickly than we think because this crisis has a different cause. It has not been generated by booms and overheated economies where demand outstrips the ability of producers to produce and they respond by increasing prices.
Here the cause is an enforced curtailment of output which affects almost all sectors of all economies. It is global and severe.
Increasing prices are the market response to shortages of goods and services. For example, if many restaurants do not reopen and those who do reopen are trying to restore their balance sheets, what is going to happen to restaurant prices? We will not know until they start to reopen.
Already the price of international air travel has increased astronomically when it is available.
Likewise, international freight costs have risen. That is understandable when shipping has been disrupted and the freight capacity on passenger aircraft no longer exists. Increased freight costs will feed through into prices of goods.
The restaurant and air transport industries are examples of what must be widespread. In these cases, new money does not need to filter through economies to produce price increases.
Conclusions
The combination of reduced output and additional money, even just one or the other, has the tendency to increase prices.
We do not know whether there is or will be a net increase in the supply of new money.
We do know that there is a massive fall in output.
We do not know how long the output slump will last.
We do know that some producer costs are already increasing, also that shortages of goods and services usually means price increases.
For these reasons, prices will probably increase irrespective of whether the money supply increases.

John Bone
April 22, 2021

Nice! Would you entertain the possibility of a short term run up in prices as a result of demand for a finite amount of goods and services (accumulated savings during Covid) followed by stabilisation and possible deflation once the full extent of the "output gap" is realised.

Paul
April 19, 2020

If my employer is going broke and is getting govt money to pay me with and I am now getting 25% less than I was getting before, then am I really going to bid the price of a coffee, bread whatever up to $ 20.00? . I will be spending less , not more at all the shrinking number of businesses I may use to keep life and family together. Those businesses will have customers who are poorer, not richer....so can anyone explain where the “ massive asset inflation “ that so many commentators repeat like a fact- of -life mantra will come from? As one person told me last week “ I’m still getting a pay check, only difference is that it’s a lot less and it’s coming from government not my old boss”
The only way I can imagine runaway inflation happening at a street level is if banks start handing out loans to consumers that don’t have to be paid back...then I might buy a new house car whatever...somehow I can’t see that happening...pity, I could use a new car, but restricted retiree income won’t allow it, having just watched my very modest nest egg lay a negative egg of almost 40%
Interest rates are now so low that even if they became zero on my house loan I still couldn’t increase my spending, the govt has effectively no more ammo in that stimulus gun .
I’m a simple person ( I still haven’t worked out how there were wheelbarrows of money for a loaf of bread in pre- war Germany , or what was the point was of billion- dollar notes in Zimbabwe); so I would welcome any explanations . As one reader asked “ how come no inflation emerged after QE mark 1 in US?”
Mystified still....

Lisa
April 28, 2020

For every Japan you can can see 5 Latin American countries and African countries that have experienced this inflation. The immense wealth of Japan may be part of the reason they have remained in a deflationary situation along with an aged population and a generation of young people not marrying or breeding.
But to Paul the original commentator, there is a point with inflation where you can't cut spending. My husband lived in Argentina for 40 years. Milk one day $1 and the next $2 and the next $3. He can recall people grabbing food off shelves as the Supermarket worker is trying to attach with the tagging gun the new price on a sticker to go on top of the current one! This is why there is such poverty in these countries ... their middle class of the 60s and 70s are now part of the poor whose entire budget is utilities food and rent. Food that takes up 50% of their earnings, rents go up 30% a year. There is no money to spend on anything else. That is what happens with inflation - there is a point where you eventually are homeless and can't even eat. Australia relies on consumer spending ... places with high inflation can't afford it. Let's hope we never get there ... any printing is moderated to avoid the start of the spiral

Paul
April 19, 2020

If my employer is going broke and is getting govt money to pay me with and I am now getting 25% less than I was getting before, then am I really going to bid the price of a coffee, bread whatever up to $ 20.00? I will be spending less , not more at all the shrinking number of businesses I may use to keep life and family together. Those businesses will have customers who are poorer, not richer....so can anyone explain where the “ massive asset inflation “ that so many commentators repeat like a fact- of -life mantra will come from? As one person told me last week “ I’m still getting a pay check, only difference is that it’s a lot less and it’s coming from government not my old boss”
The only way I can imagine runaway inflation happening at a street level is if banks start handing out loans to consumers that don’t have to be paid back...then I might buy a new house car whatever...somehow I can’t see that happening...pity, I could use a new car, but restricted retiree income won’t allow it, having just watched my very modest nest egg lay a negative egg of almost 40%
Interest rates are now so low that even if they became zero on my house loan I still couldn’t increase my spending, the govt has effectively no more ammo in that stimulus gun .
I’m a simple person ( I still haven’t worked out how there were wheelbarrows of money for a loaf of bread in pre- war Germany , or what was the point was of billion- dollar notes in Zimbabwe); so I would welcome any explanations . As one reader asked “ how come no inflation emerged after QE mark 1 in US?”
Mystified still....

Tim Mountjoy
April 19, 2020

Paul - You are dead right and if we print money to replace money lost then as you describe there will not be inflation for the reasons you give. As you also note we managed to print trillions post the GFC and spent our time worrying about deflation not inflation.

In summary you only get inflation when you inflate pay packets beyond what they are producing or Gov expenditure beyond what the country can supply. We are certainly not doing that now and we are more likely to be facing deflation that inflation due to the huge loss of incomes.

Josh
April 19, 2020

Why has there been no inflation in Japan for more than 20 years despite the BOJ’s best efforts to create it?

John
April 30, 2020

The Japanese are great savers,. often exceeding 25% of incomes, typically invested in Government bonds, financing the Government's massive debts. Government keeps interest rates low to negative, so it can keep borrowing cheaply from saver citizens. Government via banks prop up zombie companies from the property crash of decades ago. Companies don't readily offer pay rises, so workers don't have a lot of disposable income, given the high saving rate. The population is declining as young Japanese don't marry much or breed anymore, suppressing demand. Especially the well educated young women, who have rejected the traditional patriarchal society that would condemn them to a life of submissive servitude post marriage.

girish
May 03, 2020

Japan is net exporter and the currency does not depreciate against US dollar a reserve crrency.

Most probably Australia, Newzealand Taiwan South Korea are net exporters and may not face inflation.

Recently US FED opened Swap lines to 15 countries and all of them are net exporters. So they do not feel inflation as they can peg their interest rates to Zero.

Adrian
April 16, 2020

I agree Russell and Frak Gomez, so many articles back in 2009-10 that there was going to by hyperinflation due to QE and it has not happened yet...

Dave
April 16, 2020

This idea that you can’t break the Laws of Physics may be correct but there are no Laws in Economics, only Theories. Laws and Theories are completely different in Science. When I started Economics 101 at University in the late 60s I was told by the lecturer that the Keynesian economic theory was no longer correct. When I continued to Macro Economics the next year a different lecturer told us a lot of Economics 101 theory was wrong. 

Alan Khaw
April 16, 2020

Thanks for this article. A few of us were discussing this. I thought the relative value of money is what used to be pegged to quantities of gold and now to mainly US $. Therefore as US and AU are both increasing the supply of money then I assumed the relative value of AUD is about the same, relatively, and this prices all our purchases and sales (including imports and exports).

I also thought by printing the cash for expenditure by the government is to address a social concern (access to goods and ensure community security from social breakdown) rather than an economic concern?

This article I thought also indicates why a fiat currency is important, avoiding what Greece had to go through because they don't have their own currency to devalue/increase supply to balance their economy.

And I thought inflation can be brought under control by removing the quantity of money through taxes and reducing grants etc and paying down those bonds, thus reducing the impact on asset prices.

Brian
April 16, 2020

Thanks for that, a riddle has been solved in my head, thanks. Regardless of how this plays out that is a great explanation of the dynamics of printing more money and its possible perils.


I have often been stumped by the question, from a mate at the pub to my 8-year-old daughter as to why "don't the gov print more money!!!". I plan to play a game with my daughter next time she asks (using monopoly pieces), showing her the more money there is (in her pocket) for the same amount of available goods and services, the more money that will be demanded for them (via competition of labour and resources), leading to inflation and a devaluation of her "fixed assets". 

Peter Castle
April 16, 2020

Its very interesting. We do live in a modern evolving economy and it is possible the old theories (by Tim Congdon) like this one do not apply.....or wont do the harm that people fear. Certainly the Japanese example is one where it has not done the ruin that many people thought it would. In fact Japan is now looking like it may come out of all this quite strongly. MMT (modern monetary theory) really could work well. I dont see a problem if the Gov borrow from the reserve bank (and basically never have to pay it back) and use the money to build infrastructure and provide jobs. The loser will be those with no assets, as stimulus money continues to create asset inflation. But hey, at least people have a job and if the Gov can keep a lid on inflation for consumables (which they have done) then its all good?

Andrew
April 16, 2020

I was a young novice investor during the late 1980s when interest rates were around 20% for a mortgage and inflation around 10%. My parents had sold their house and were living in a caravan while they built a new place near Coffs Harbour to retire in. They were constantly amazed that every time they made a progress payment to the builder the interest was so high on their account that it was almost paid for by the time the next progress payment was due.

This time however interest rates cannot go up or everyone goes broke - household, commercial and government debt is so extreme. In any case the easiest way to wash away the excesses of MMT is to let inflation eat at it.

What to invest in - anything that is real and nothing that is cash or a cash instrument. Gold, real estate, equities. As always there will be winners and losers and timing will be important. As they say the market (and the RBA and governments) can remain irrational longer than we poor investors can remain solvent.

Frak Gomez
April 16, 2020

Graham, all fine in theory but let's consider:

1. years of money printing in the US, Europe and Japan since GFC have not created appreciable inflation. So there is no evidence money printing in certain circumstances generates inflation and undermines the value of the currency. I hear all the time people go on about how money printing is devaluing money, however if inflation is the only objective measure of the decline in value of the currency and we have little to no inflation, then clearly money printing is not a concern here.

2. money printing that supports fiscal stimulus will directly avoid large drops in output, so this idea that you are creating more money chasing shrinking pool of goods or services is a classic idea that again should create inflation, but in practice does not. Money printing to support fiscal stimulus means people and businesses are able to maintain spending thus avoiding a much larger drop in output than if nothing was done.

3. The boffins will have theories as to why money printing nowadays in modern economies does not create inflation. Perhaps it's because we have more trade which avoids too much money chasing a limited amount of goods, or it could be the fact that services are a much greater proportion of a modern economy which is less reliant on the physical availability of goods. Whatever the reason is, having a fiat currency that you can control the volume of during a crisis is far better than the gold standard limited money supply that was largely the cause of severe recessions/depressions in the 19th and early 20th century. Why would anyone want to go back to that?

stefy
April 17, 2020

Do you not believe that the housing bubble, stock bubble, bond bubble, are not inflation. Governments have conveniently avoided using them as inflation targets. Instead they use a basket of consumables such as petrol, food, clothing and services (correct me if I'm wrong?), and maintain that inflation is almost non existent. Rubbish.

SMSF Trustee
April 18, 2020

No stefy, that's not inflation to an economist. Inflation refers to the price level for goods and services that we consume from our income, not the value of our assets.

When inflation happens in goods and services, then the purchasing power of income is reduced.

When asset prices go up, the capacity of investors to purchase the things they need to live on goes up. And those who haven't invested can still purchase goods and services from their income for the same price.

They are absolutely different things and it's been a very misleading debate that some financial market analysts have had in recent years that confuses these.

Lisa
April 28, 2020

I see SMSF Trustee believes that the inability to afford milk is inflation but the inability for most young Australians to buy a house because their wages are not keeping pace with the housing prices accelerating (due to debt and tax breaks encouraging excessive allocation of capital to this class) is what ...? The housing prices have inflated beyond what is affordable. I have to agree stefy .... it's inflation.

Mark
June 14, 2020

Totally agree. Housing bubble of 2000s, corporate debt (stock buybacks, private company valuations etc) bubble over the last decade. Throw in student loans, auto loans, credit card debt and even housing costs...there has been massive inflationary pressure that “didn’t get counted”. I blame Greenspan who started this gamble ~20 years ago. Unnaturally low rates, punish savers who then look for yield and are forced more into riskier investing (perpetuating bubbles & busts). The world is in a debt death spiral.

Russell
April 16, 2020

why did inflation not emerge after GFC QE?

Ramani
April 16, 2020

Those intrigued by the unreality of the magic money tree paying for itself through journal entries with no impact for people can feel now 'relief' they were not barking up the wrong tree, and go back to worrying about the post-binge hangover Mark Benham mentions.
The immutable laws of physics and economics combine with equally inevitable behavioural psychology (people, groups, nations, professions etc will act in their own perceived interests) and the dominance of short over the long term (the global monetary stimuli being one example) mean that the eventual reckoning will be fierce. Add political ego from the need for clinging to power and skewed national powers (Bangladesh vs China, for example), implementation of even sensible policies will be fraught.
Sober advice such as from Mr Congdon is critical. Placebo assurances like offering naturopathy to fight cancer ('this too shall pass', 'can we have more?') ignore the pain people pass through enroute to survival or passing away.

nick shugg
April 16, 2020

Could we go further and explore how it would best to invest in a time of rising inflation. What should we tilt towards and tilt away from? I'd like to hear from economists on the expected impact of high inflation on cash, bonds, property, gold, shares. For that matter interest rates... which could really affect people with high mortgages.

Anthony Asher
April 16, 2020

Sorry, but I do not find this entirely convincing. It seems to be part of a rather simplistic economic debate. For the other side, http://ralphanomics.blogspot.com/2011/01/modern-monetary-theory-beats-tim.html
Printing money can cause demand pull inflation, and raising taxes can therefore stop it if necessary. At this point we clearly need people to spend where they can!

Gary Judd
April 16, 2020

In this article, Prof Congdon does three principal things. He emphasizes that the critical consequence of shutting down parts of the economy is diminished output. He explains mechanisms by which governments pump money into economies. And he points out that the inevitable consequence of lower output and increased supply of money is price inflation.

In these things, he is correct. He is saying: Be warned "In the modern world, the state can create money out of thin air, but it cannot create new goods and services in the same way."

Goods and services must be produced before they can be consumed. Business must produce them. Increasing taxes reduces business investment and therefore the ability to produce and does nothing to slow monetary expansion unless government reduces its spending and repays its debt which modern governments appear incapable of doing.

The Ralphonomics blog of 2011 is not a comment on this article.

Gary Judd
April 16, 2020

Firstlinks published my piece "Deflation is good" on 20 October 2016, Issue 178 -- https://www.firstlinks.com.au/deflation-good-trying-defeat-danger/. Its focus was the impact on prices of increased production whilst the money supply was constant, and the evil of pumping money into the economy to try to cause prices to increase. It is also relevant to today's situation where there are massive falls in production.

simon
April 16, 2020

"" Further, if someone refuses to accept legal tender notes in payment, that is breaking the law.""

Not quite right...

""The Reserve Bank of Australia says sellers are "at liberty to set the commercial terms upon which payment will take place" before the purchase "and refusal to accept payment in legal tender banknotes and coins is not unlawful".
abc.news.net.au 20/30/2020

Christian
April 16, 2020

I was thinking about this too. If the currency is totally worthless, then the tradie who comes to fix my tap might just want to get paid in something else, like a gallon of petrol.

Peter
April 16, 2020

Or a 12-pack of toilet paper.

Chris
April 16, 2020

Thanks, been trying to get my head around this issue. I was chatting yesterday with another person with an economic background and he could not really explain it (like many other professionals!).

Phil
April 16, 2020

Thanks for finding that Graham, very good. It would be interesting to see in what pockets the inflation will come, if under supply of specific and sought after product is chased with ever increasing amounts of money , we will see some variances in the inflation rate for the underlying basket of goods.

Warren Bird
April 16, 2020

"Too much money chasing too few goods." The classic definition of inflation.

Graham Hand
April 15, 2020

Many people asked for an explanation of how money is 'printed' and whether the amount has any limitations. It's clearly not a simple concept to understand, but this is the best explanation we could source.

Mark Benham
April 16, 2020

Graham - useful article - now interested to understand Chapter 2 - What is likely to happen when the "big rise in inflation" hits?

Liam
April 16, 2020

I suspect those carrying high debt will be crushed. Time to build as big a buffer as possible on mortgages

 

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