It’s unclear that this is happening. There is a good argument that what we are seeing is basis effect + pent up demand and has literally nothing to do with monetary policy. This is why the consensus for now is that current inflation is transitory.
We know that there are supply shocks - chips, lumber, commodities, appliances, labor have all been in the news lately. We also know that monetary base is increasing rapidly:
I wouldn't say there is any consensus at all, but that's why we have capital markets. If you believe price levels are going back down and we'll return to normal you are free to take the other side of the trade from me.
> If you believe price levels are going back down and we'll return to normal you are free to take the other side of the trade from me
That’s not what people mean when they say inflation is “transitory”, they mean inflation will be high now (prices will rise) and will be low later (so prices will not continue rising). I don’t think people think there will be deflation (prices return to old ones).
If that's the case, most of the same trades that you'd make with persistent inflation still make sense. You still want to be out of cash, out of fixed-income, in gold, in crypto, and in stocks with significant pricing power. The value of supply-limited or cash-generating assets will rise along with price levels, while your debt levels will remain denominated in pre-inflation dollars.
Pretty much the only trade you wouldn't want to be in is commodities like lumber, wheat, or steel, where there is constantly new supply coming online.
I'm still skeptical that this will actually be the case: once "sticky" prices like wages or consumer durables start going up, it puts more money in consumer pockets, which means they can spend more, which means businesses can raise prices, which gives employees leverage to demand more CoL increases. Cue wage/price spiral. And we're already seeing these increases in wages, consumer durables, and advertising, with no signs of a Fed tightening yet.
The anatomy of the 1970s inflation wasn't a uniform increase in all prices across the board: it was a set of transient price increases in specific industries, which then abated but were followed by price increases in other industries, which again abated but were followed by increases in wages (in some professions - income inequality increased dramatically in the 70s) and financing costs. We didn't realize inflation was a problem until it started showing up in mortgage rates around 1977 - inflation dropped rapidly from 1974-1976 (from 12.2% - 4.8%), and it appeared that it was a transitory problem resulting from the 1973 oil shocks.
