Thursday, August 5, 2010
Global Inflation Trade
Oil, the grains, the softs, and metals are unusually strong for a "deflationary" environment. Deflation sounds intectually correct but the financial markets are telling a different story. Technological improvement, higher efficiency, and Chinese wage arbitrage kept inflation in check but those effects are disappearing rapidly. On the monetary side, money printing is the default policy choice at the Fed. I just don't see deflation happening.
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They are not going to print. The FED is a collection of bankers when all is said and done and losing control of the printing press will cause hyperinflation and destroy them. They will do anything except that. You are right commodities are not indicating deflation, but sooner or later all this credit we created must collapse and default.
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