Source: Bloomberg —
Welcome to Money Distilled. I’m John Stepek. Every week day I look at the biggest stories in markets and economics, and explain what it all means for your money.
Could US Housing Crash The Economy?
I’ve realised that one of the phrases I use most in this email is “no one has a crystal ball.”
I’m not going to stop doing that. I think it’s important for us all to remember that forecasts are often wrong (just ask the UK’s Office for Budget Responsibility — boom boom!) and talk is cheap.
One thing I will say, though, is that the current environment is less conducive to having strong conviction than almost any other I’ve worked in.
In the long run, the view I have the most confidence in is that we’ve now escaped the era of “secular stagnation” and that the foreseeable future involves wrestling more with inflation than with deflation.
Inflation will have its ups and downs and we might even see negative prints at some point (spiky prices and maths combine to create those sorts of things). But in the longer run, I think the underlying trends all point in the direction of more rather than less inflationary pressure.
I actually think this is a good thing as it will inject some urgency and some discipline into our capital allocation process. When capital is cheap and easy to get hold of, bad ideas thrive because they involve less work than good ideas.
It’s easy to build a business selling £10 notes for £5 a piece, and telling low-rate-addled investors that it’s all about “building an audience.” It’s hard to build something that might actually be both useful and profitable, and that has clear criteria for success or failure.
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