“It’s fair to assume we’re going back into an era of inflation,” Larry Fink, chairman and CEO of BlackRock, the world’s richest investment management company, said in comments at the Future Investment Initiative conference in Saudi Arabia and reported by CNN.
The global COVID vaccination campaign will create herd immunity by September, Fink said. “That will create demand for jobs and will become somewhat more inflationary.”
Also, a new global trend toward domestic buying to support national economic recoveries, exemplified by President Biden’s “Buy American” directive, is “a basic inflationary trend,” Fink noted.
The U.S. Federal Reserve’s stated policy is to allow inflation to exceed the Fed’s 2-percent target rate for brief periods during the economic recovery before it will raise interest rates to choke off inflation.
TREND FORECAST: Higher inflation will slow GDP growth. The more something costs, the fewer products people will buy. Should inflation spike, it will force central banks to raise interest rates, slowing their injections of monetary methadone, which have artificially inflated equities and economies.
We maintain our forecast for Dragflation: the economy will sink into the “Greatest Depression,” but prices of goods, services, and commodities will rise.
Prices will not rise because of supply and demand, since, as with oil, for example, there will be more supply than demand. Prices will rise because the value of currencies will decline as central banks devalue them by printing trillions to “stimulate” sagging economies. Thus, the cheaper the currency, the more it costs to buy products.
Gold and silver will continue as the most precious metal safe-haven assets. We maintain our forecast of new rounds of artificial central bank monetary stimulus and massive amounts of government fiscal stimulus that will artificially prop up equity markets and economies.
