The MasterBlog: FW: GMO's James Montier On The Rise Of The Aust(e)rians: "Any Deflationist Victory Would Result In The Rapid Arrival Of QE2"
Subscribe to The MasterBlog in a Reader Subscribe to The MasterBlog by Email

MasterBlogs Headlines

Tuesday, July 27, 2010

FW: GMO's James Montier On The Rise Of The Aust(e)rians: "Any Deflationist Victory Would Result In The Rapid Arrival Of QE2"

GMO's James Montier On The Rise Of The Aust(e)rians: "Any Deflationist
Victory Would Result In The Rapid Arrival Of QE2"


The ever insightful James Montier of GMO presents a short, sweet, certainly
controversial (he espouses stimulus over austerity) and to the point essay
on what everyone at Zero Hedge realizes (or should by now) all too well: "If
the Austerians and their ilk win the day, we may see some short-term
deflationary pressures and, as noted above, they will be even more dangerous
than they were previously because we are starting with no margin of safety
in terms of the inflation rate. However, the U.S. at least has a central
banker who seems to understand the risk. Despite his complicity in getting
us into this mess in the first place, Ben Bernanke has shown he understands
the risks that deflation poses, especially in a debt-laden economy, and
believes that he has sufficient tools to prevent deflation from gaining
traction in the economy (even with rates at zero). Indeed, he has given
speeches where he has laid out a menu of policy options in the event of
deflation risk. First on the menu was aggressive currency depreciation;
second was the introduction of an inflation target; third was money-financed
transfers (effectively, tax cuts financed by printing money); and, finally,
quantitative and qualitative easing. Ergo, the "good news" arising from an
Austerian victory would be the rapid arrival of QE II. Thus any short-term
deflation will ultimately lead to long-term inflation pressures." Montier
once again brings up the ever more critical Current Account equation. By now
it is more than clear that deleveraging by both private and public sectors
will not end well, however throw in the inability to fund the Current
Account, and you can see where our concerns about the $1.3 trillion collapse
in shadow banking lending in Q1 2010
> , and the ramifications
on our CA as foreign banks null and void their shadow exposure, will soon be
the most discussed topic by pundits. So aside from the obvious investment
choices, how does a professional money manager (it is kinda tough to tell
your LPs "all your 2 and 20 generating assets are tied up in zero cash
yielding gold" unless one's last name ends in -aulson, -horn or -rott), how
does one plan for "A flight path that contains short-term deflation and
long-term inflation?" Read on to find out (and no, it's not US Treasurys).

h/t Adam


No comments:

Post a Comment

Commented on The MasterBlog

Tags, Categories

news United States Venezuela Finance Money Latin America Oil Current Affairs Middle East Commodities Capitalism Chavez International Relations Israel Gold Economics NT Democracy China Politics Credit Hedge Funds Banks Europe Metals Asia Palestinians Miscellaneous Stocks Dollar Mining ForEx Corruption obama Iran UK Terrorism Africa Demographics UN Government Living Bailout Military Russia Debt Tech Islam Switzerland Philosophy Judaica Science Housing PDVSA Revolution USA War petroleo Scams articles Fed Education France Canada Security Travel central_banks OPEC Castro Nuclear freedom Colombia EU Energy Mining Stocks Diplomacy bonds India drugs Anti-Semitism Arabs populism Saudi Arabia Brazil Environment Irak Syria elections Art Cuba Food Goldman Sachs Afghanistan Anti-Israel Hamas Lebanon Silver Trade copper Egypt Hizbollah Madoff Ponzi Warren Buffett press Aviation BP Euro FARC Gaza Honduras Japan Music SEC Smuggling Turkey humor socialism trading Che Guevara Freddie Mac Geneve IMF Spain currencies violence wikileaks Agriculture Bolívar ETF Restaurants Satire communism computers derivatives Al-Qaida Bubble FT Greece Libya NY PIIGS Republicans Sarkozy Space Sports BRIC CITGO DRC Flotilla Germany Globovision Google Health Inflation Law Mexico Muslim Brotherhood Nazis Pensions Peru Uranium cnbc crime cyberattack fannieMae pakistan stratfor Apollo 11 Autos BBC Bernanke CIA Chile Climate change Congo Democrats EIA Haiti Holocaust IFTTT ISIS Jordan Labor M+A New York OAS Philanthropy Shell South Africa Tufts UN Watch Ukraine bitly carbon earthquake facebook racism twitter Atom BHP Beijing Business CERN CVG CapitalMarkets Congress Curaçao ECB EPA ETA Ecuador Entebbe Florida Gulf oil spill Harvard Hezbollah Human Rights ICC Kenya L'Oréal Large Hadron Collider MasterBlog Morocco Mugabe Nobel Panama Paulson RIO SWF Shiites Stats Sunnis Sweden TARP Tunisia UNHRC Uganda VC Water Yen apple berksire hathaway blogs bush elderly hft iPad journalism mavi marmara nationalization psycology sex spy taxes yuan ALCASA ANC Airbus Amazon Ariel Sharon Australia Batista Bettencourt Big Bang Big Mac Bill Gates Bin Laden Blackstone Blogger Boeing COMEX Capriles Charlie Hebdo Clinton Cocoa DSK Desalination Durban EADS Ecopetrol Elkann Entrepreneur FIAT FTSE Fannie Freddie Funds GE Hayek Helicopters Higgs Boson Hitler Huntsman Ice Cream Intel Izarra KKR Keynes Khodorskovsky Krugman LBO LSE Lex Mac Malawi Maps MasterCharts MasterFeeds MasterLiving MasterMetals MasterTech Microsoft Miliband Monarchy Moon Mossad NYSE Namibia Nestle OWS OccupyWallStreet Oman PPP Pemex Perry Philippines Post Office Private Equity Property Putin QE Rio de Janeiro Rwanda Sephardim Shimon Peres Stuxnet TMX Tennis UAV UNESCO VALE Volcker WTC WWII Wimbledon World Bank World Cup ZIRP Zapatero airlines babies citibank culture ethics foreclosures happiness history iPhone infrastructure internet jobs kissinger lahde laptops lawyers leadership lithium markets miami microfinance pharmaceuticals real estate religion startup stock exchanges strippers subprime taliban temasek ubs universities weddimg zerohedge

Subscribe via email

Enter your email address:

Delivered by FeedBurner