Use the next correction to prepare for inflation
By Kirk Spano
Aug. 24, 2012
“Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once unthinkable dosages will almost certainly bring on unwelcome after-effects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.”
– Warren Buffett
In my September 2009 letter to clients, I discussed the idea of coming inflation and stated it would be years before it arrived. Three years have now passed and the early whiffs of noticeable inflation are hitting.
While bigger inflation is unlikely until a firmer recovery arrives, that day is not far off. As I have said repeatedly, ultimately, the needs and wants of billions of people will trump the lingering effects of the financial crisis and global debt imbalances.
Already throughout the Middle East, eastern Europe and southeast Asia, projects that were delayed in 2007 and 2008 are moving again. Soon, the economies of more developed nations will push forward as growth remedies gain favor over austerity.
In the United States, we can see even with the Romney/Ryan ideas that spending in the United States would barely slow, while deregulation in the financial and energy sectors would be used stimulate growth — for better and worse. In Europe, almost all nations are clamoring for a growth solution to offset debt imbalances. Chinese cities are committing hundreds of billions to prop up growth.