I am in the camp of those expecting high inflation or hyperinflation. The operative word is “expecting.” Nothing in the future is certain. Many others are in the opposite camp believing that deflation is the more likely outcome. The near-term evidence has been more supportive of their position.
So much time is spent on this one issue because its ultimate resolution will be the single most important key to economic success over the next decade. Thus, it behooves all of us to understand the issue, develop an expectation and then position our portfolios and decisions accordingly.
One of the ardent believers in deflation (or at least no hyperinflation) is Mish’s Global Economic Analysis. In a recent piece Mish adamantly argued that there will be no hyperinflation and provides a variety of reasons why. Mish is thorough and convincing on most topics he tackles. This one is no exception. He is one of the better analysts and interpreters of economic trends. I respect his opinion and cite him often on this website.
On this issue, we see different outcomes. To understand the case for deflation, I highly recommend you read his recent piece.
There is no certainty regarding how the inflation-deflation issue actually plays out. Important variables and decisions are both unknown, unmade and still to come. The future is filled with unknown decisions made in political and economic environments not knowable today.
Regardless of which side of the debate you fall on, it is important to understand both sides equally well. If you understand the reasoning and logic behind both positions, you can monitor the development of events accordingly. Early warning signs are always important to investors. The rationale provided by both camps provide you with roadmaps by which to measure which scenario is developing.
Learn both positions and the rationale behind them. Position your situation according to the one that you believe, but leave enough flexibility that you can re-position in the event that developments proceed along the other path.
I remain in the camp of high inflation/hyperinflation. No, I am not certain of my conclusion, but neither is Mish certain of his. Nor should you be certain of either.
