Inflation Watch A mid-month focus on inflation via Traditional Indexes, Commodity Prices, and Labor Costs
A month and a half ago we became concerned with rising commodity prices, which has been especially obvious over one and three month time horizons. Those trends continued in March, with several of the commodity indices now showing double digit price increases from three months ago.
Whether it’s the start of a new bond bear market or not, there’s no need to rush... and why shorting bonds may not be the best idea, even during a bond bear market.
The greatest danger in late 2010 and 2011 is monetary debasement inflation, not demand based inflation. Trillion dollar deficits (or higher) may be acceptable shorter term (2009), but unless our government and politicians provide strong evidence of fiscal responsibility, the dollar’s respectability could be undermined, with foreign lenders and investors going elsewhere.