I propose today and in the summer heat which we can finally taste after weeks of rain, cold and grayness, the translation of this very important article (source here) where the two biggest bosses of Wall-Street confirm the analysis that I have shared with you since the start of the pandemic, namely that we will experience very high and structural inflation, contrary to the annoying forecasts of the soft “consensus” which tells us that inflation will be “temporary” and low .
Wall Street Executives Say Inflation Could Be Worse Than Expected
“Two of Wall Street’s top CEOs have different views on inflation, but both deviate from the Federal Reserve’s forecast that price hikes are transient and will subside once shocks in supply and other pressures will have eased.
Larry Fink, chairman and CEO of BlackRock, the world’s largest asset manager, believes inflation is not temporary, as he believes that de-globalization will “consistently lead to more inflation” in the future.
“I believe inflation is going to be more systematic,” Fink told CNBC on July 14. “I believe this is a fundamental, foundational change in the way we navigate economic policy. “
The emphasis that shifted from globalization to national security during the Trump administration will continue, according to Fink.
“After World War II, our economic policy was based on consumerism,” he said, adding that this policy allowed Americans to buy goods for less.
“Over the past five years, we’ve moved away from that core belief, and we’re now saying jobs are more important than consumerism,” Fink said.
He noted that Washington is now focusing more on national security issues, as well as the return of manufacturing.
The Fed’s inflation projection for June rose sharply to 3.4% for this year, from 2.4% previously forecast. But Fed officials expect inflation to return to 2.1% next year and stay close to its long-term inflation target of 2%, indicating that inflationary pressures will be transient. .
In an interview with CBS’s “60 Minutes” in April, Fed Chairman Jerome Powell argued that it is difficult to watch inflation in a country “when wages can move to abroad ”.
“The globalization of the economy and technology have allowed manufacturing to take place all over the world. It is very difficult for people in rich countries to raise prices or raise wages, ”he said, suggesting that this trend will continue.
Most economists are still in the transitional camp and say inflationary pressures will subside next year.
During congressional hearings last week, Mr Powell faced intense questioning about rising prices and was questioned about the central bank’s ability to manage inflation.
Mr. Powell reaffirmed that the current easy monetary policy is appropriate because the progress of the economy towards the Fed’s targets is “still a long way off”.
Consumer prices continued to rise at the fastest pace since 2008. Inflation rose 5.4% from last year as supply bottlenecks and the ongoing recovery in the sectors hardest hit by the pandemic continued to push up prices.
JPMorgan Chase executives are optimistic about the US economy, but believe the strong recovery will continue to fuel inflation.
“I don’t think this is all temporary,” Jamie Dimon, CEO of JPMorgan, said on July 13 in an earnings conference call with analysts. “But it doesn’t matter if we have very strong growth.”
Dimon believes strong consumer demand, record numbers of job openings and soaring wages will continue to drive economic growth.
“You could have growth in the second half of this year that is stronger than it has ever been in the United States of America,” he said.
Therefore, he predicts that inflation will “be a little more serious” than people think.
Meanwhile, investors are increasingly pessimistic about soaring consumer prices.
Investors’ 12-month inflation outlook worsened in the second quarter, according to a Gallup survey. In addition, 72% of investors expect inflation to last for a long time and one in four investors say they have changed their investments due to inflation fears. “.
So you can feel the arrival of inflation which will only be “temporary”?
You may not listen to me, because I’m a humble granary economist with his chickens admittedly, but listen to these two great Wall Street bosses. BlackRock is the largest asset fund. JP Morgan one of the biggest banks. When they talk to you about inflation, it is especially credible that the analysis is completely correct and relevant and echoes the reflections that we have been sharing for months.
Prepare for inflation, it will sweep over us, between shortages and pandemic! Those who want support to face this difficult period can subscribe to the Strategies letter, all the information here.
It is already too late, but all is not lost.
Prepare yourselves !