I give the odds as follows, as long as Bernanke, Geithner and Obama are in charge:
* Going Japanese (high inflation, very slow growth, massive ballooning of debt to GDP, QE for the long term, 80% drop in stock market over next 20 years, persistent high unemployment) = probability of 75%
* Stagflation (high inflation, but not hyper inflation, slow to no growth, slow whiddling down of debt and deficits, persistent high unemployment, flat lined stock market) = probability of 15%
* Recovery (deflation to very low inflation, higher interest rates and austerity measures leading to short sharp downturn in GDP, followed by debt and deficit reduction, financial and economic stabilization, and a stronger dollar; unemployment spikes short term but starts falling steadily over longer term, sharp drop in stock market short term and steady growth over long term) = probability of 5%
* Hyperinflation (massive inflation, persistent high unemployment, economic and fiat currency collapse, along with stock market spike followed by collapse) = probability of 5%
If they fire Bernanke and bring in someone like Volcker or Jim Grant (of Grant's Interest Rate Observer), as well as more fiscally conservative leaders in the White House (like Ron Paul or Romney) and Treasury, then I think the following probabilities apply:
* Going Japanese = probability of 15%
* Stagflation = probability of 30%
* Recovery = probability of 50%
* Hyperinflation = probability of 5% |
