A fascinating prediction based on sound inflation and interest rates analysis.
I share the analysis but not the prediction. Here's why.
The idea in simple terms is that rising inflation will push interest rates up and will subsequently oblige most over-indebted countries into financial repression. Starting with Japan later this year. This is presented as not quite a positive outlook since this will incur massive capital mis-allocation and therefore a decline of productivity and stagflation. "A warm bath" at the beginning followed by a rather steep decline of well being later.
I find just one "little" flaw in this reasoning: Complete ignorance of the past! For this has always been the path followed in the past, simply because it is the path of least effort and resistance, and it has always failed without exception. The reason is that you can NEVER exit over indebtedness through inflation over what would anyway be decades. The not so smooth trajectory is always interrupted by wars, revolutions and pestilences. No exception.
This is the true flaw of economic analysis: it tends to be linear in a non linear world and like physics at the edge of a black hole, it completely breaks down when confronted with extreme conditions. A debt which cannot be repaid, won't however governments tell you that they will over the coming decades. Mesopotamians already understood this basic economic law and had put in place regular "debt jubilees" to purge the system. We pride ourselves for having much progressed since these remote times. It is certainly true in technological terms but we're about to prove that it is not as far as the economy is concerned!
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