After Civid-19 Pendamic, Inflation is another accident the business cycle is about to face for more than a few years. How we prepare for it and thrive needs effort and more than a short term approach. As if the last time we witnessed it on a similar degree was in 1857, then we are already too much in the past to relate to it. A classic problem of econohistory, how can it hit me when it happened so long ago?

Share dilution is when a company issues additional stock, reducing the ownership proportion of a current shareholder.

Shares can be diluted through a conversion by holders of optionable securities, secondary offerings to raise additional capital, or offering new shares in exchange for acquisitions or services.

When a company issues new stock, it is usually in a positive light, to raise money for expansion, buying out a competitor, or the introduction of a new product.

Current shareholders sometimes view dilution as negative because it reduces their voting power.

Diluted earnings per share is a way to calculate the value of a share after convertible securities have been executed.

The if-converted method is used to calculate diluted EPS if a company has potentially dilutive preferred stock.

The Treasury stock method is used to calculate diluted EPS for potentially dilutive options or warrants.

See this paper: https://www.scmp.com/week-asia/opinion/article/2132761/stock-meltdown-have-we-entered-age-inflation

Dear Robert Amzallag, thank you for asking in the discussion such a strategic issue as the inflation threat at present. I agree with the opinion of my previous speaker, prof. Sudhir Yadav that, based on historical experience, we can draw little conclusions and experiences, because never before in the economic history of the world we have encountered the phenomenon of such a specific crisis as covid-19, causing very quickly just a few weeks after the detection of plague outbreaks in Asia, In Europe and North America, gigantic supply shocks (in the capital goods markets and in the production of various types of final goods) and demand shocks (rapid changes in consumption demand in individual countries with a market economy) worldwide. For many years I have been involved in the valuation of securities, financial instruments from the private and public market, and in my private opinion, as a valuation specialist, we deal with the main capital markets of the world, such as the United States of America, Great Britain or Japan, and the largest stock exchanges in the European Union and China with asset price inflation since at least 2009, since US financial institutions received enormous money from the so-called financial easing programs (de facto money issue without coverage by the FED to save business, credit market, jobs and consumption demand), which they use on a gigantic scale, not only the central banks of the USA, the European Union and Japan, but also many other countries during this pandemic, the corona virus used such a drastic way of conducting monetary policy by the central bank in agreement with the government, which at the same time applies an expansionary fiscal policy. In conclusion, on the capital market, I have been observing asset price inflation for a long time, completely detached from the fundamentals of the share prices of IT technology companies prone to speculative movements and being in the group of the so-called fashionable and promoted by players. On the other hand, in the market of consumer goods and services, inflation will also manifest itself, but it is difficult to predict how high and how long it will last, because the functions of money demand and money supply are influenced by many more variables than in the past, even in the past from the 1980s. that the cryptocurrency quasi market is developing without any control or set direction, which absorbs a large part of the electronic money issued by banks and uses up some inflation. In conclusion, inflation impulses in individual countries are revealed more and more strongly, while how consumers will behave in terms of spending money when covid-19 is completely extinguished and people stop worrying about their health, it is difficult to predict, apart from the fact that they will definitely buy more in fixed mode and that the consumption of services in a banned or severely restricted pandemic will increase sharply. Best Regards

I am convinced that it is the absolutely exact definition of the present state. There is an enormous impact of speculations that produce "profit", but do not produce values, the banks manipulate the population to increase consumption and do depts. The states have chronically unbalanced debt. The people are suggested that a financial profit can be obtained almost without any real effort, just by "investments". This is a system full of positive feedbacks acting destructively.

Thank you Sudhir, Zbysek and Dariusz,

You all make very good points and I agree that inflation, as measured by the PPI , has benefitted in the last 30 years from globalization and the huge expansion in labor availability it had created .This probably explains why economic, stock market and financial crisis have not changed the downward trend over this period. Also, money expansion as a standart response of central banks and treasuries over these crisis has inflated assets prices and risk appetite to unbelievable levels we see today.

However until know low inflation was considered a given. Not anymore.

Clearly, the Covid 19 crisis has accelerated these trends but has it changed the dynamics of the global economy? Markets seem to answer yes and in this case how?

It is very difficult to draw conclusions from the limited data but the sudden rise in food prices in emerging markets is very worrying.

Sir Robert,

The incidence of Covid-19 ushered in an unexpected increase in inflation rate. The effect hit the global economy which is causing the present financial instabilities.

Regards

I would also like to mention my fundamental factors that will influence the increase in the CPI inflation rate in highly developed countries to 2-3% y / y in 2021 -2022: firstly, a retreat from globalization, an increase in tariff and non-tariff protectionism, and secondly, an increase in the cost of living of households as a result of an increase in energy and food prices, thirdly, an increase in the expansionary fiscal policy, the so-called protection policy during the last phase of the fight against the covid -19 pandemic in the form of benefits for families and companies. Finally, the attitude of the central banks themselves in countries such as the USA, European Union countries, Great Britain, tolerating the increase in prices of consumer products above the inflation target as part of monetary policy, to support governments in the process of overcoming the economic crisis and keeping the cost of credit as cheap as possible for domestic companies mired in debt but suffering from insufficient demand for their goods and services in 2021. What is your opinion on these issues ?

I agree with Mr. Grala that the Covid19 is a very specific phenomenon. There is just an analogy at the end of WW I., but it had not so wide publicity. I have studied the old Hungarian, Austrian and Czechoslovak newspapers from that period because of the then monetary measures. But there were very little reported about the then epidemy. The Covid19, or more exactly Covid 21 puts many questions about its origin and real reasons for its spreading. There are many indications in serious scientific journals that it is not natural. And resolution of this question will allow us to analyse the impacts of Cvid on the present financial system.

Dariusz,

Your answer gives a comprehensive summary of the factors that will impact the level of inflation in the near future.

I might just add another one. The lack of return on the massive spending that governments in developed countries are allowing. Most of the measures to support the economy do not seem to bring any clear improvement in future productivity or create new industries that could counter inflation. This ought to have consequences on the increase of prices in the coming years.

The unresolved question is how all these factors will interact and will they create an inflationary environment.

As for my opinion, I proposed an analysis on the subject in the last paper I uploaded on Research gate called:

The economic impact of the Covid 19 crisis

It might give some clues on the forthcoming economic situation.

Dear Robert, thank you for your appreciation and suggestions for reading your research paper on the causes and pace of changes in inflation. I agree with you on the conclusions. I hope that the world economy will not experience a repeat of the early 1920s, when inflation slipped out of the control of the naive politicians of some countries who wanted to burden society with the so-called inflation tax in order to service the sovereign debt cheaper. Best Regards

Agree with the views of Prof Sudhir Kumar Singh Yadav Phd and Zbyšek Šustek

Thank you for the many important points made. I find the latest one of Dariusz very pertinent and also concerning. It is my impression that the major central banks have now relinquished their role as guardians of financial restrain particularly towards inflation. Also, public debt has reached such level that, short of hyper inflation, there is no clear path to repay it in the foreseeable future.

Is there a recovery path forward ?

thank you dear Robert for your appreciation. I would also like to refer to your last question in a few words: is there any path to recovery the money market? Over a year ago, in my team of analysts, we selected three possible scenarios for the development of inflation in Poland and in the world in the context of a shock caused by a pandemic, which was then completely undiscovered and unpredictable for us. We have established three possible scenarios of CPI inflation for Poland, which is a member state of the European Union, but outside the Euro zone. The first assumed inflation to remain at the level of up to 3% annually, the second - an increase to 4% per annum, and the third worst increase in inflation to the level above 5%. I am afraid we are in a scenario of high inflation. It seems to me that the problem of excessive inflation is slowly becoming a global phenomenon, as billions of money poured into economies as part of the aid programs for the "choked economy" during the peak period of the pandemic and broken supply chains and "freezing" of almost the entire service sector. The question is, how do we deal with this new wave of inflation nationally and globally? First, this wave of inflation is a global phenomenon that is most influenced by US monetary policy, as the FED has all the keys to controlling global money. I believe that a single country, such as Poland, has no greater chance of effectively combating inflation without the support and synchronization of actions in the restrictive monetary policy on the part of the largest central banks in the Western world. Secondly, actions in the area of ​​tightened monetary policy must be very clearly signaled and justified, so as not to cause another shock in the money market. Then, interest rates should be gradually raised in all major economies in order to curb the effects of arbitrage and sudden flows of "hot" money. Central banks should again apply non-standard anti-inflation measures to suppress the money supply without causing a sharp decline in transaction demand for money. Thirdly, it is begging to radically stop speculation on the cryptocurrency market and impose such speculative transactions with a very high tax on profits and high commissions on conversion to fiat currencies. Fourthly, it seems reasonable to plan a global cut of government debts caused by financial support programs for companies and medical services during a pandemic, in order to globally reduce the level of already gigantic debt of countries (some countries such as India, Italy, Brazil, or even Slovakia incurred huge your spending on fighting the epidemic). The full cost of fighting the plague is yet to be summarized and disclosed by country. These figures will be shocking even for the most experienced financiers! This future data, I believe, will also create turmoil on the stock exchanges, as it will raise the question of how these debts will be paid by individual national governments ... Presumably, we are facing a time of further turbulence and the formation of a new world order, as I believe a new economic order will be established in the world soon. Some countries will gain a competitive advantage, others will surprisingly lose from the pandemic. Best Regards

Thank you all for all your good points.

I could not answer them at that time as the situation was evolving and it was difficult to get a clear idea of where inflation was going.

I was particularly surprised by the wide range of opinions of economists suggesting that inflation remains a not very well understood phenomenon.

Since then, I finalized a paper that takes a historical approach and tries to extract the main factors that influenced inflation in the last 80 years. From there, I make some forecast that will help verify the findings.

I uploaded the paper on ResearchGate under the title: "Inflation in the context of the Covid 19 crisis: A bankers perspective".