Cover of MoneyWeek magazine issue no 456

King Coal

9 October 2009 / Issue 456

How to profit from fossil fuels... PLUS:

  • The high-tech defence stock to buy now
  • Bill Bonner: Why the slump is far from over
  • America's most feared director takes on capitalism


Inflation or deflation?

A couple of years ago, when the financial crisis was kicking off, Bill Bonner, John Stepek and I had the first of many conversations about inflation and deflation. A few cups of tea in, we agreed that we expected to see a few years of deflation, then a nasty bout of inflation. That view hasn’t changed. The question is simply when deflation turns to inflation.

As far as the market is concerned, the turn is almost upon us. Press stories about inflation currently “swamp” those about deflation, as John Authers reports in the FT this week. And Australia’s shock rate rise, coupled with gold surging through its previous record high to hit $1,040 an ounce this week (finally!), both suggest we are on to the next stage of the crisis – the bit where you should buy any hard assets you can get your hands on, be they equities or houses.

But we’re not so sure. Why? Because there just isn’t any evidence of inflation anywhere yet.

Read the full editor’s letter here: Inflation or deflation?