The Boy Who Cried Wolf: Is An Inflationary Decade Ahead?
“…though the Villagers heard the cry, they did not run to help him as they had before. ‘He cannot fool us again,’ they said. The Wolf killed a great many of the Boy’s sheep and then slipped away into the forest.” Æsop
Key Takeaways
• Recent developments – politicians’ growing control over creditcreation, average inflation targeting policy, and the historicexpansion of the broad monetary aggregate – suggest the 2020scould become a stagflationary era.
• The vaccine breakthrough could bring back pre-Covid-19spending habits. Such a return will increase monetary velocityand drive up inflation.
•The gargantuan credit expansion in 2020, recent months’ bond,real estate, commodity, and equity rallies signal that we havelikely entered a crack-up boom.
•The global economy’s new inflationary paradigm requires athoughtful re-examination of traditional portfolio theory. In light ofrecent developments, investors must have increased concernabout the risk of inflation.
Know Your Enemy: Understanding Inflation
The extraordinary events of 2020 have motivated us to release an In Gold We Trust special on the heightened risk of rising inflation rates. The leitmotiv of this report is the classic children’s fable The Boy Who Cried Wolf, by Æsop.
Why have we chosen this? As the story goes, a boy guarding over sheep jokingly cries wolf, twice. After returning to the village twice, the locals decide not to respond when the boy cries again. Little did the villagers know that this time the wolf was attacking the sheep. Similarly, the global paradigm of recent decades with its repeated warnings of inflation has consistently reinforced disinflation. Now, as trust in public institutions continues to erode, populist policies could serve as the bedrock of a new inflationary paradigm. We suspect the monetary developments of 2020, coupled with the recent paradigm shift, could push inflation rates significantly higher. Policymakers and investors at large are reluctant to acknowledge this possibility. Decades of the deflationary paradigm have rendered them wholly skeptical of a potential wolf attack: spiking inflation.
Read the full report “The boy who cried Wolf” by clicking HERE
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Investorenbetreuung Incrementum Fonds:
axessum GmbH
Harald Steinbichler
Tel: +43 1 888 60 69
E-Mail: harald.steinbichler@axessum.com
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The publication must not be understood as an offer to sell or a solicitation of an offer to buy securities. In particular, it is not a sales prospectus within the meaning of the law, but a promotional presentation that serves to provide individual information. Reading this publication is not a substitute for individual advice. The information contained in this publication does not constitute investment advice, but merely provides a brief summary of the key features of the fund. The full details of the fund, detailed information on investment objectives, fees and risks as well as legal and tax information are contained in the sales prospectus. The sales prospectus is the sole binding basis for the purchase of fund units. Please read the prospectus carefully and consult your legal and/or tax advisor before making any investment. The tax treatment of this fund depends on personal circumstances and may be subject to future change. The sales prospectus is available free of charge in German and English upon request from the management company.
•This document is for information purposes only and does not constitute investment advice, an investment recommendation or an invitation to buy or sell, but is merely a summary of the most important aspects of the fund. In particular, the document is not intended to replace individual investment or other advice.
•The information contained in this publication is based on the knowledge available at the time of preparation and is subject to change without notice. The authors have taken care in the selection of the information, but accept no liability for the accuracy, completeness and timeliness of the information provided. This fund is domiciled in the Principality of Liechtenstein and may also be registered for public offering in other countries. Detailed information on the public offering in other countries can be found in the current (if applicable complete and simplified) prospectus. Due to different registration procedures, no guarantee can be given that the fund and – if applicable – the sub-funds are or will be registered in all jurisdictions and at the same time.
•Past performance is not a guide to future performance. Values may fall as well as rise and you may not get back the amount invested. Returns on investments may fluctuate. Changes in exchange rates may adversely affect the value, price or income of investments. Before proceeding with an investment, you may want to seek professional advice about the risks of the investment and its tax implications. All graphics are provided by Incrementum AG.
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