It is no news to us that the government has only one way of solving financial problems and that is to eject more money to the economy and just as expected, the Central banks around the world has done real well to eject money into the economy. From the US, UK, and every other country around the world, the government has been pumping money so as to prevent a recession as a result of a pandemic.
It is no doubt that with more money in the country comes inflation , so are we to expect inflation any time soon?
With inflation, we expect that the price of goods and services will increase and the value of the currency will depreciate but this case seems to be the reverse. There hasn't been any inflating commodity in the consumer market as at currently, this can be as a result off lack of jobs and low consumer demands.
We could say that inflation may not go beyond 2% annually even with central banks selling bonds and printing more money to stabilize the economy but could there be inflation in some sectors unnoticed?
For instance, with the US stimulus Cheque, and bailout which was shared at the beginning of the lockdown, after the economy was shut down and the stock market fell to the ground, the stock market went up spontaneously because people already stocked food and the money was only needed to pay debt and invest so the money went into the stock market and the price went up. Apart from the fact that companies are buying into cryptocurrency, it is no doubt that a lot of people have invested this free money into the money market instead of the consumer market and one thing about putting excessive money into the financial/money market is that the inflation is seen as a profit instead of an inflation.
A lot of people have continue to say that the market is overvalued and I could say that the reason for this saying is because people are just investing their free stimulus into the financial market giving the price of stock over priced value and this same thing goes with every other financial market.
It is no doubt that when money is pumped excessively into the economy, there is inflation of hyper-inflation but in this case, the economy is somewhat stable so do you think the inflation is happening in the financial market?