Saturday, April 21, 2012

CEI World Economic Outlook April 2012

Most of the trends that can be observed currently have been in place for some time and most likely will continue so. The longer these trends of rising commodity prices will continue, the more they become incompatible with rising bond and stock prices. One of these two groups must give in. For the first group - gold, oil and commodities - to crash, the emergence of a deflationary depression will be required. This scenario cannot be fully excluded. For the second group - bonds and stocks - to crash, an outbreak of inflation will do. Over the past decades, and particularly in the past couple of years, monetary and fiscal policies of the major economies of the world have provided all that is necessary for hyperinflation to happen. Nevertheless, an outbreak of hyperinflation should not be considered as a certainty. The world economy finds itself in the curious situation that conditions for both, inflation and deflation, have been prepared. The world economy resembles a boat on high sea that has been loaded up with explosives. Either a spark will make the load explode before the boat will sink or the boat will sink on its own and take all that’s on board down with it to the ground. 

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