not translate into wage growth. (In the 1970’s, it did). Because wage labor is
approximately 70% of total business costs, he does not see meaningful inflation
without wage inflation. He’s also down on gold because it is not a contrarian investment today as it was 10 years ago (he had a nice year in 2003 buying
gold and gold stocks when nobody wanted them).
The widespread belief among the greatest financial minds today that hyperinflation
is inevitable greatly disturbs him. In the Western world, he sees hyperinflation as a political choice – one that requires the will of the populous. (Forget Zimbabwe,
he says – that might as well be Timbuktu. It’s not our culture.)
He sees society’s current mood as “dark” (Tea Party, Occupy Wall Street, and social unrest in Europe to name a few), and believes this makes bailouts and money printing very hard. The only environment that makes hyperinflation possible is “the mother of
all depressions” he says. In keeping with his anticipation of paradox, he quipped that
if you believe in hyperinflation, then you should be levered up long on 10 and 30-year Treasuries…because in order for hyperinflation to become a political reality, deflation must arrive first.
Source: CFA Society of Sacramento. This post originally appeared at ZeroHedge.