The question facing investors which will have the most impact over the next several years is whether deflation or inflation will prevail. Neils Jensen of Absolute Return Partners LLP lays out the deflationary view.
As investors we are faced with the consequences of our decisions every
single day; however, as my old mentor at Goldman Sachs frequently
reminded me, in your life time, you won’t have to get more than a
handful of key decisions correct - everything else is just noise. One of
those defining moments came about in August 1979 when inflation was
out of control and global stock markets were being punished. Paul
Volcker was handed the keys to the executive office at the Fed. The rest
is history.
Now, fast forward to July 2009 and we (and that includes you, dear
reader!) are faced with another one of those ‘make or break’ decisions
which will effectively determine returns over the next many years. The
question is a very simple one:
Are we facing a deflationary spiral1 or will the monetary and fiscalstimulus ultimately create (hyper) inflation?
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