Andy Xie's Latest—Stagflation

Veering Towards Stagflation
The market psychology that the Chinese government is capping the downside for speculators has emboldened them to speculate in any asset class with a China angle. The assumption is not tested because the low Fed's interest rate continues to drive money out of dollars into China-related assets. In the speculative game around China today, the force is the Fed's zero interest rate. China is a story that the speculators can agree on and act upon. When inflation forces the Fed to raise the interest rate quickly, probably in 2012, this assumption will be tested. I suspect not many speculators will wait for the result.
Another good one from Andy. Central banks have to drain liquidity at some point, and if it happens due to high inflation, the drop will be severe.

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