Should any fund managers with millions to spare for bonus
payments be reading this, they could do a lot worse than to give a few of them
to the people who write this blog.
Without wishing to blow our own trumpets, our predictions
over the last three years have proved a lot more accurate than those of the
expensive “experts” hired by major players, who have lost their shirts in the
crash and its aftermath.
First, we predicted the crash – which, to be honest, was not
that difficult to foresee, but many in authority still did not foresee it. Then,
at the height of the crisis, we said things would stabilise so long as no one
panicked – a prediction that called for a lot more courage at the time. Most of
the “experts” were saying the opposite – panicking, in fact.
Since then, we have been warning about the return of
inflation. We started our warnings at the time when the “experts” were
screaming about the dangers of deflation.
The “experts” have finally caught up with us. It can no
longer be denied that inflation is back.
We are told that it is a temporary anomaly – a “blip”. We
have heard that one before.
Some of the factors behind the most recent rise will indeed
work their way through the system fairly quickly. However, there may be longer
term trends at work as well.
Inflation reduces the value of debts – bad news for fixed
rate creditors, but good news for their debtors. This is particularly
significant when the biggest debtors are governments, most notably those of the
UK and the USA.
Do our politicians have the moral fibre to resist the
temptation to let a little inflation into the system to ease their problems
when their deficit crises really start to bite? The signs are not encouraging:
Britain has been printing money and American politicians on all sides seem
content to put off their deficit problem with the time-honoured delaying tactic
of appointing a committee to consider it.
At the same time, almost everyone is ignoring the
inflationary time bomb of the combination of limited natural resources and
In the years ahead, entrepreneurs who take the probability
of inflation into account in their planning and preparations will have a
competitive advantage over those who do not.