Cover of MoneyWeek magazine no. 417, 9 January 2009

Beware safe havens

9 January 2009 / Issue 417

Inflation could return sooner than you think... PLUS:

  • Why you should be buying into gold miners
  • How I went from poor farmer's son to oil billionaire
  • Bill Bonner waves a sad farewell to 2008


So, inflation or deflation?

Happy New Year! January’s the time for scouring the entrails for clues on the year ahead, but making predictions for 2009 is even tougher than usual. It shouldn’t be. After all, only one question really matters – should we be more worried about inflation or deflation? Trouble is, there’s no easy answer to that question. Just look at our Roundtable experts; while our regular columnist James Ferguson believes we’re facing wholesale, Japanese-style deflation for years to come, Braeburn chairman Jim Mellon reckons that the money-printing efforts of central banks around the world could see us return to fears about inflation by the end of this year. So who’s right?

Although we’ll certainly see deflation in the short-term, I’m not convinced it’ll last long. But even if you believe we’ll follow Japan along the deflation path, it’s still worth looking at where the balance of risks lie if you get it wrong. James Montier at Société Générale points out that the US Treasuries market is already pricing in a Japan-style slump. So anything less than massive deflation means that investors buying government debt now will probably end up losing money. On the other hand, mild inflation, or even lower deflation than expected, would be good for the price of most other assets. And if one thing’s for sure, it’s that America is determined to avoid deflation by any means necessary. As Montier says, Japan didn’t start printing money (or ‘quantitative easing’ as it’s known) until seven years after deflation first hit. Ben Bernanke has hit the presses before the US has even had a sniff of deflation.

Read the full editor’s letter here: So, inflation or deflation?

Also in this week’s edition of MoneyWeek:

News: Dark clouds gather over the high street
News: The buyout boom’s big meltdown
News: Shocking fraud at India’s IT giant
Markets: Stocks: expect a sell-off
Markets: Is the worst over for emerging markets?
Markets: ‘The junkiest junk in history’: the return of defaults
Sector: The credit card backlash
Sector: What to look out for in tomorrow’s world
Briefing: Should Britain join the euro party?
Strategy: Will the dogs have their day in 2009?
Strategy: Ignore the January jump
Share tips: Share tip of the week: well placed software giant
Share tips: Turkey of the week: under-achieving telco
Share tips: Gamble of the week: undervalued miner
Personal view: Four high-yielding stocks to buy now
Personal view: How to spot the first buds of spring
City View: My predictions for 2009
Politics & Economics: Israel’s escalating war in Gaza
Politics & Economics: Russia turns off Europe’s gas taps – again
Roundtable: Will inflation make a comeback later this year?
Personal Finance: The best deals for your savings
Personal Finance: How to pay off your credit-card debt
Personal Finance: Turn up the central heating to save money
Personal Finance: Tax advice of the week: Make sure you hit the deadline
Funds: Hang on to your gold
Fund of the week: Plan for recovery in 2010
Share tips: What Fleet Street’s tipsters are buying now
Entrepreneurs: Harold Hamm: pump monkey who struck oil
Investing in property: Pessimistic property pundits aren’t gloomy enough
Profile: Sir Tom Hunter: ‘I did want to give my money away. Just not quite like this.’
Bill Bonner: Goodbye, 2008, we’ll miss you
Travel: Four luxury hotels to start the New Year
Toys: Kia’s cheeky headturner has soul
Wine: A stunning red to order by the lorry-load
Property: Luxury holiday homes