Sunday, May 3, 2009

Inflation watch linkfest

Fiscal trouble ahead?
From the FT:

The developed economies will continue to be confronted with huge national budget deficits, despite the fact that stimulus spending is likely to taper off, the International Monetary Fund says. The overall budget deficit of the Group of 20 nations next year will be 6.5% of GDP, only slightly below this year's 6.6%. Next year the budget deficit will be 8.8% in the U.S. and 9.8% in the U.K., the agency said.

Morgan Stanley upgrades their Chinese growth forecast
Morgan Stanley is upgrading their Chinese growth forecast from 5.5% to 7.0% for 2009(see here). This should be supportive of commodity demand.

Deflation risk is receding
Scott Grannis, who blogs at Calafia Beach Pundit, points out that inflationary expectations are rising again.

More on Simon Johnson
Here is a discussion of a left vs. right brain analysis of Simon Johnson’s analysis about the financial elites dominating policy. The logical (left brained) analysis says that there is no evidence of collusion by the oligarchs, or financial elite. The right brained argument is that this is a conspiracy – and conspiracies are set up to not leave any smoking gun evidence. You have to come to your conclusions by inference.

No signs of social backlash
I wrote before that we should watch for social signs of a backlash against Wall Street. The New York Magazine reports a quote from a Citibank executive as an illustration of the culture of entitlement:

No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?

Ryan Avent responds:

[W]hen you have a few people taking home billions, that’s a sign of either very good luck or some brilliant new strategy. When you have a lot of people in finance taking home billions, then something has gone badly wrong. Either something unsustainable is building, or there are some serious inefficiencies in the market.

So far, the populist backlash doesn’t seem to be gaining any momentum. So it looks like we will see another round of going into debt to reflate economy and sustain these imbalances.

Free newsletter for Inflation bulls
I reiterate my offer: I have begun a longer email list for inflation bulls. There is no cost and I will keep your email address to myself. Drop me a line and sign up here.

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