EDITOR NOTE: The inflationary “inconvenience” that the Fed has dubbed “transitory,” that same phenomenon Deutsche Bank calls “decade-defining”--a stark warning from a bank that now finds itself far from the status quo of economic opinion. The bank claims that inflation is “different this time.” We’ve heard that phrase used countless times before on so many different conditions. But with regard to inflation, how so (?), we ask. It’s the fact that monetary and fiscal policy is looking well past the potential of higher inflation and soaring national debt levels to pursue a near-utopianistic vision of social equality. Tackling socially coercive barriers on a policy level allows individuals to compete in an arena that doesn’t give unfair advantage to certain individuals, races, or cultures. Once all is set on even ground, then competition is a bottom-up affair, where social mobility is relative to one’s competitiveness. But imposing a top-down order not to establish equality in opportunity but to impose equality in outcomes is another matter. It’s anti-capitalistic. It’s a blatant form of governmental overreach. Practically speaking, it goes by another well-known name: socialism. And that’s where our government is currently heading.
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DB Research is home to a broad church of views but we coalesce around a House View for our key macro forecasts. This will certainly continue. However, in these extraordinary times, the range of outcomes is wide. So, in the interest of intellectual diversity I have encouraged our research group to leave their comfort zone and carefully consider alternative viewpoints. With this in mind, we intend to publish occasional papers under the new “What’s in the tails?” banner. We hope this will stimulate debate with our clients by providing what we consider reasonable alternatives to the central forecasts and scenarios. To kick this series off, I have joined my colleagues Jim Reid and Peter Hooper in examining the potential for higher inflation and a return of boom/bust cycles over the next few years.
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