Monday, September 13, 2010

Inside the Jackson Hole Meetings: Central Bankers Concerned about Inflation Monster

Don't be fooled by all that media hype about government economists concerned about deflation.

The word from a top insider is that the real concern is about a great new inflation and the guessing is only about when it will hit.

I have already identified Philippa Malmgren as an insider with top elitist credentials, among other things she was a member of the Plunge Protection Team.

Not surprisingly she turned up in Jackson Hole for the meeting of central bankers. Following the meetings at Jackson Hole, she arrived in Australia where she delivered a speech and revealed what central bankers were really thinking at the meetings.

Wouter Klijn of Australia's Investor Daily reported on her speech:

Apparently, she had just attended a central bank symposium in Jackson Hole, Wyoming, and was ready to share the discussions she had with Federal Reserve officials with the audience.

Armed with the latest insights into the US economy, Malmgren told her audience the world was to face an even bigger threat...

Inflation as a risk to portfolios had been forgotten, but now the world should brace itself for a return of the monster.

"That was part of the driving discussion at Jackson Hall: now that the Great Moderation of inflation is over, how long do we have before inflationary forces begin to make themselves apparent?" Malmgren said.

Luckily, she did not hold her audience in suspense for too long.

Inflationary pressures were already here, she said. We just cannot see them.

"Food prices have been jumping very rapidly in the last 18 months, but food and energy are not included in CPI (consumer price index)," Malmgren said.

Inflation will snowball as countries increasingly fight over access to food and this will impact on investment returns.

"Real returns are going to kill your portfolio," Malmgren said.
Malmgren was a complete bundle of cheer. She also warned about relations between the U.S. and China:

Malmgren revealed the world was facing a new arms race between the United States and China.

In a tale that took the audience from nuclear submarines to Chinese data tapping devices disguised as routers to target practice on old weather satellites, Malmgren impressed on her audience that people should be concerned about the Middle Kingdom's display of military strength.

What has this to do with stocks? Well, according to Malmgren, US companies were smack bang in the middle of the stoush and that would affect international equity portfolios.

Apparently, the kerfuffle between Google and the Chinese government is not about conflicting views on freedom of speech, but rather about national security.

"We cannot afford to invest in equities where we don't understand how the national security interests will hit these companies," Malmgren said.
Malmgren's warning about China should not be taken lightly, not because the Chinese plan to launch some kind of military attack against the U.S., but because Malmgren is spreading this thinking.

Clearly, the elite have added the "China threat" to the "Plastic bag environmental threat" as a new "problem" that will have to be dealt by Western governments, most assuredly in some way that will cost citizens money and infringe even more on their freedoms.

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