Nice post, Steve. That article I posted earlier tries to explain where the inflation went. But it's anyone's guess at this point. I think Austrian theory is more right than Keynesian, though. It's just a matter of whether you believe in living within your means or not. In a connected, global world, when the US Fed prints money, that money goes where the yield is, which was to the emerging markets. That money drove up prices and even stimulated decent growth over there. Look at some of the countries now experiencing classic Austrian consequences of inflation and goods shortages. Now, as the QE is tapering, the more responsible EM countries are increasing rates to protect against runaway inflation over there. When that money comes home, what do you think will happen here? I don't know, but ABCT would tell us that inflation will start to pick up in the US, if they continue to taper or even raise rates here. That flood of money will find it's way into increased prices, just as our economy starts to stall. Then we may see a replay of the 1980's.
We sure do live in interesting times. Mostly, I'm thinking not about how to make money, but how to preserve wealth. As the retail investors seek the last little bit of upside, I pity them. This isn't the time to be thinking about how to position your portfolio long. Preservation should be the focus now. |
