Hi all,
Ever the contrarian in my thinking, I am seeing increased evidence that we are about to get a round of inflation. For us investors it can be a double edged sword, as we can pay off our loans in deflated dollars, but have to put up with growing interest rates.
It is possible that we see over the next couple of years, a golden period of price increases(due to inflation) not unlike the late 60's/early 70's. During that time of exploding inflation, interest rate rises lagged the inflation rate.
In the US the fed reserve has told investors to "pin the ears back" when it comes to borrowing, by the following statement
"The
Committee judges that, on balance, the risk of inflation becoming
undesirably low remains the predominant concern for the foreseeable
future. In these circumstances, the Committee believes that policy
accommodation can be maintained for a considerable period. " (Fed reserve web page)
Given that metal prices and grain prices are in a strong bull market, oil prices that are maintaining a high level and could explode with the next "unexpected event" in the middle east, the ingredients are building for high inflation.(not to mention the budget deficit in the US)
During the early 70's when inflation was in the high teens but interest rates were in single digits, people were able to pay off their homes in a couple of years. At the same time those who had large sums of money in the bank found the purchasing power of cash crashing.
Also during the period of high inflation and rising interest rates, being in the stockmarket was the wrong place.(except for trading of specific situations). The DJIA in the US basically fell from 1966 to 1982.
Now while this is mostly relevant to the US, I feel that we follow them so closely that the same would probably occur here.
The BOOM?? well we may see a doubling in prices in a short period and then a redoubling within 10 years. During this period inflation could run ahead of interest rates(and while they rise fuel further inflation).
Any others see this a possibility of happening?? Please offer your opinions.
bye
Ever the contrarian in my thinking, I am seeing increased evidence that we are about to get a round of inflation. For us investors it can be a double edged sword, as we can pay off our loans in deflated dollars, but have to put up with growing interest rates.
It is possible that we see over the next couple of years, a golden period of price increases(due to inflation) not unlike the late 60's/early 70's. During that time of exploding inflation, interest rate rises lagged the inflation rate.
In the US the fed reserve has told investors to "pin the ears back" when it comes to borrowing, by the following statement
"The
Committee judges that, on balance, the risk of inflation becoming
undesirably low remains the predominant concern for the foreseeable
future. In these circumstances, the Committee believes that policy
accommodation can be maintained for a considerable period. " (Fed reserve web page)
Given that metal prices and grain prices are in a strong bull market, oil prices that are maintaining a high level and could explode with the next "unexpected event" in the middle east, the ingredients are building for high inflation.(not to mention the budget deficit in the US)
During the early 70's when inflation was in the high teens but interest rates were in single digits, people were able to pay off their homes in a couple of years. At the same time those who had large sums of money in the bank found the purchasing power of cash crashing.
Also during the period of high inflation and rising interest rates, being in the stockmarket was the wrong place.(except for trading of specific situations). The DJIA in the US basically fell from 1966 to 1982.
Now while this is mostly relevant to the US, I feel that we follow them so closely that the same would probably occur here.
The BOOM?? well we may see a doubling in prices in a short period and then a redoubling within 10 years. During this period inflation could run ahead of interest rates(and while they rise fuel further inflation).
Any others see this a possibility of happening?? Please offer your opinions.
bye