Friday, May 27, 2016

China Thinks the US Will Default via Inflation

Geopolitical expert Pippa Malmgren says the Fed's 2% inflation target is effectively a promise to default, reports Mauldin Economics.

The rest of the world sees it coming and wants to get out of the way--meaning they want to get out of dollars.

Speaking at the Mauldin Economics Strategic Investment Conference in Dallas, Malmgren said geopolitics begins with monetary policy.

Malmgren correctly observes that the US government is so deep in debt that even if it taxed 100% of the population 100% of its income for years, it wouldn’t be enough. Malmgren believes the government has a different stealth plan: default via inflation.

To those outside the US who own Treasury debt, the Fed's 2% inflation target is effectively the promise of a 2% haircut. Worse, they don't think the US will stop at 2%. Inflation has been below target for so long, they assume we will overshoot the target for years.

Bottom line: Emerging-market nations and especially China are exiting the US Treasury market.


(via Business Insider)

1 comment:

  1. The powers that be delude themselves that when inflation arrives they will be able to control it. That will prove to be egregiously wrong and we will all suffer for it.