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We Could Be Headed For "Worldwide Inflation," Says FT's Wolf

Posted Sep 21, 2009 11:25am EDT by Peter Gorenstein in Investing, Recession
Related: uup, udn, spy, dia, gld, TBT, TIP

Thanks to unprecedented central bank intervention and massive stimulus programs, the global economy is no longer teetering on the edge of a cliff.  "There's no doubt we have come through this in the short run very, very well," says Martin Wolf, chief economics commentator at The Financial Times.

That's not to say all is well.  A year after Lehman's fall, Wolf questions if we have a "truly healthy financial system" to keep the recovery alive.  Even if the economy continues to rebound, "it's going to fell quite depressing, [with] high unemployment" for several years to come, he claims.

And, that's not to mention, the biggest risk of all: inflation.

Short to medium term, deflation remains the top concern, but Wolf acknowledges that could change on a dime if investors decide "the U.S. government and British government will never mange their public debt problems." If that happens, "then there could be a real flight from these currencies and that would generate as it did in the 70s, worldwide inflation," Wolf says.

Inflation, recessions, a bear market… and bell bottoms. I doubt anyone wants to relive the 1970s.

 

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