If we recall the middle of 2009, one of the hottest debates among traders and economists was revolving around the subject of US economy experiencing inflationary or deflationary pressure. Many experts expected that, following the unprecedented central banks’ expansionary money supply policies, the G7 countries would witness a rapid increase in the level of prices. Exactly like the first half of 2009, the US CPI during the 1H10 has hovered near the flat line. Moreover, the all-item inflation numbers shifted into negative territory when oil went through a price correction. The annualized core inflation rate from December 2009 to May 2010 stands at only 0.3%, the tamest five-month annualized rate since early 1960s. If things remain status quo, is US in danger of turning into a Japanese non-inflationary experience? Continue reading ‘Back To Safe Heaven’
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Traders, economists, strategists, central bankers are all exposed to a new dilemma: is the US economy experiencing an inflationary or a deflationary pressure? On one side, under a global turmoil environment where most economies are shrinking considerably, prices tend to fall and subsequently the aggregate demand for goods and services subsides. On the other side, due to unprecedented central banks’ expansionary money supply policies many analysts expect a rapid increase in the level of prices. The solution to the problem still represents a challenge for many investors since the near-term investment strategy is very much correlated with the tendency of the price index. Continue reading ‘Inflation vs. Deflation’
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