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Cash in on the war between inflation and deflation
Harvard professor Niall Ferguson has spoken of a “clash of the titans” between the competing forces of inflation and deflation — or Godzilla versus King Kong — and, on balance, thinks inflation is the bigger risk due to the “double danger of printing money and excessive \ deficits”.
Now the hedge fund advised by best-selling author Nassim Nicholas Taleb is launching a fund that seeks to profit from the return of hyper-inflation.
Taleb’s 2007 book The Black Swan warned of the impact of highly improbable events on world markets. US hedge fund Universa, with which he is associated, is now launching the Black Swan Protection Protocol-Inflation fund.
FT.com / Comment / Opinion - How economists can misunderstand the crisis
On Wednesday last week, yields on 10-year US Treasuries – generally seen as the benchmark for long-term interest rates – rose above 3.73 per cent. Once upon a time that would have been considered rather low. But the financial crisis has changed all that: at the end of last year, the yield on the 10-year fell to 2.06 per cent. In other words, long-term rates have risen by 167 basis points in the space of five months. In relative terms, that represents an 81 per cent jump.
Escape from the Price Spiral by Dane Stangler, City Journal 31 December 2008
Escape from the Price Spiral
Robert Samuelson’s history of postwar inflation belongs on Obama’s bookshelf.
The Reckoning - Chinese Savings Helped Inflate American Bubble - Series - NYTimes.com
To be sure, there were few ready remedies. Some critics argue that the United States could have pushed Beijing harder to abandon its policy of keeping the value of its currency weak — a policy that made its exports less expensive and helped turn it into the world’s leading manufacturing power. If China had allowed its currency to float according to market demand in the past decade, its export growth probably would have moderated. And it would not have acquired the same vast hoard of dollars to invest abroad.
Others say the Federal Reserve and the Treasury Department should have seen the Chinese lending for what it was: a giant stimulus to the American economy, not unlike interest rate cuts by the Fed. These critics say the Fed under Alan Greenspan contributed to the creation of the housing bubble by leaving interest rates too low for too long, even as Chinese investment further stoked an easy-money economy. The Fed should have cut interest rates less in the middle of this decade, they say, and started raising them sooner, to help reduce speculation in real estate.
FT.com / UK - Merkel criticises US over crisis | prescient call from Merkel
“Excessively cheap money in the US was a driver of today’s crisis,” she told the German parliament. “I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis.”
FT.com / Columnists / Martin Wolf - How imbalances led to credit crunch and inflation
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Inflation is a sustained rise in the price level: the result of too much money (or purchasing power) chasing too few goods and services. A one-off jump in commodity prices is not inflation. Nor need such a jump cause inflation. But a continuous rise in the relative price of commodities is a symptom of an inflationary process.
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