Roubini Economist: We're Headed For World of Inflation
Wednesday, March 17, 2010 10:40 AM
One way or another, RGE Monitor senior analyst Arun Motianey says we’re headed for an inflationary world.The three most likely investing scenarios now, Motianey says, are inflation without indexation, inflation with indexation and deflation, says Motianey, who recently joined investment guru Nouriel Roubini's Roubini Global Economics. "Deflation is a very serious risk [but] inflation is a greater likelihood," With debt swamping governments from here to Europe to Japan, Motianey recently told Tech Ticker he thinks the central banks will probably choose to monetize public sector deficits.“I’m expecting the central banks of the world to see the light,” he says. “This would be a period of voluntary inflation, instead of involuntary inflation” (like the 1970s), he said.In other words, the Fed will print money to buy Treasuries.Motianey also expects that, because equities tend to respond positively to a bit of inflation, demand for credit will go up.In an inflationary economy, investors would do well to hang on onto corporate bonds, Motianey says. Also, natural resource and basic material equities, dividend-paying stocks and gold and other commodities are also attractive.The risks of global stagflation should not be taken lightly, says European Central Bank Executive Board member Juergen Stark, imarketnews reports.In the text of a speech delivered to the National Association for Business Economics in Arlington, Va., Stark conceded that he could "see the temptation for governments to ask for higher inflation in order to monetize the dramatic build-up of public debt."
Wednesday, March 17, 2010 10:40 AM
One way or another, RGE Monitor senior analyst Arun Motianey says we’re headed for an inflationary world.The three most likely investing scenarios now, Motianey says, are inflation without indexation, inflation with indexation and deflation, says Motianey, who recently joined investment guru Nouriel Roubini's Roubini Global Economics. "Deflation is a very serious risk [but] inflation is a greater likelihood," With debt swamping governments from here to Europe to Japan, Motianey recently told Tech Ticker he thinks the central banks will probably choose to monetize public sector deficits.“I’m expecting the central banks of the world to see the light,” he says. “This would be a period of voluntary inflation, instead of involuntary inflation” (like the 1970s), he said.In other words, the Fed will print money to buy Treasuries.Motianey also expects that, because equities tend to respond positively to a bit of inflation, demand for credit will go up.In an inflationary economy, investors would do well to hang on onto corporate bonds, Motianey says. Also, natural resource and basic material equities, dividend-paying stocks and gold and other commodities are also attractive.The risks of global stagflation should not be taken lightly, says European Central Bank Executive Board member Juergen Stark, imarketnews reports.In the text of a speech delivered to the National Association for Business Economics in Arlington, Va., Stark conceded that he could "see the temptation for governments to ask for higher inflation in order to monetize the dramatic build-up of public debt."
1 comment:
Right: This "fear of deflation" is just a ruse by central banks to keep inflating the money supply. Deflation does not keep people from spending – they always spend what's necessary. And money NOT "spent" is then saved which means it is credit to someone who invests it for capital goods etc. thus it is again being spent, only not for consumption. Money never lies completely idle to any extent whether there's inflation, deflation, stability or a solar eclipse. For deflation to seriously happen, not only the current extreme credit expansion by the central banks and states (through "quantitative easing", stimulus packages, monetising and then spending national debt etc.) but also the money that was released into the economy PRIOR to the collapse would have to be "mopped up" again. This is nowhere to be seen nor would it be technically possible (confiscation aside) so we will rather see inflation than deflation.
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