WSJ weighs in on Inflation
I came across this article in the WSJ on Inflation. They are basically saying that now may not be a good time to put all in bets on hyperinflation.
Yet with job growth muted and commodity spikes tending to be short-lived, the odds are against inflation being that high for an extended period, some strategists say.
"To enter the TIPS market now, you have to believe we'll have outsize inflation," says Thomas Tzitzouris, head of fixed-income research at research shop Strategas LLC in Washington. "Anything less and you're locking in a loss."
Why is inflation likely to remain more muted than many think? Start with commodity prices—the primary driver of inflation worries lately. It turns out that commodity-price spikes tend not to lead to runaway inflation in other parts of the economy.
Based on what the article is stating, it sounds like we're going to experience some hybrid form of stagflation. Many CAPS members dont seem to agree but thats what I've been seeing so far. Granted we did have one commodity crash in 2008 but we also had a stock market crash. Just as no one is seeing any stock market crashes in the near future, I don't see any commodity crashes in the near future. Sure there will be pullbacks, but due to the global nature of trading, what the weaker countries aren't buying will be picked up by the stronger countries. The days of the US controlling commodity prices with our buying power are over. Therefore, we can't just look at the economic situation in the US and assume that those factors alone are going to control commodity prices. So I'm sticking with my stagflation theory for the near and intermediate term. Oil may pull back, but I honestly dont expect to see $1.50 a gallon gas anytime soon if ever.