How will we solve rising inflation and massive money printing? The same way we solved massive government borrowing and rising debt: IGNORE IT!

It’s hard to imagine a simpler or more elegant solution. Plus, it works!

Like government borrowing, money printing only causes big problems when you try to reduce it.  Reduce government borrowing and the economy and markets will suffer,  Reduce money printing and interest rates will rise hurting the economy and the markets.

Hence, there’s an easy solution:  Ignore it.

Not possible you say? 

Actually, it’s very easy to ignore.  In fact, the stock market might even start to like inflation.  Profits and revenues rising with inflation will be good for corporate valuations as long as interest rates are kept low.  Some companies may even raise their prices faster than inflation, thus assuring strong profit growth.

Consumers are hurt, but if they continue to see their wages increase, the pain is lessened.  After all, inflation is when BOTH prices and wages are rising. 

Plus, the driving force behind much of the current increase in prices -- constrained supply of goods and services -- will eventually be resolved to a large degree as supply increases.  Once supply and demand are more in balance the only price pressure left will be monetary inflation from printing lots of money. 

And, as we have seen in the past decade of massive money printing, monetary inflation can be slow to grow.  To the extent it does grow, stock markets can cheer it on. 

Housing markets can also cheer it.  Home prices go up and the Fed can print more money to keep mortgage rates low. 

Inflation doesn’t seem to bother the bond market either.  They’ve already learned this lesson – ignore it.  If you are willing to lend money at 2.3% for the next 30 years, you clearly are completely ignoring the possibility of any inflation. 

And, to the extent bond buyers get worried and slow down their purchases, the Fed can always step in and buy bonds – keeping interest rates low.

The key solution for all these markets – stocks, bonds and real estate – is to ignore inflation.  Or, even better, cheer it on. 

That’s especially true if the alternative to rising inflation is rising interest rates.  

Rising interest rates will absolutely devastate the stock, bond and real estate markets.  Rising inflation will not. 

So, the solution to rising inflation is perfectly clear – ignore inflation and get low interest rates in return. 

It’s so easy that even the stock market can figure it out.  And it will.