Taleb's Hedge Fund Betting on Hyperinflation → Washingtons Blog
Taleb's Hedge Fund Betting on Hyperinflation - Washingtons Blog

Tuesday, June 2, 2009

Taleb's Hedge Fund Betting on Hyperinflation

Last week, Marc Faber said “I Am 100% Sure that the U.S. Will Go Into Hyperinflation”

Now, Universa Investments L.P - a hedge fund affiliated with Nassim Nicholas Taleb - is making a big bet that we'll get hyperinflation.

Are they right, or are the jumping the gun in calling for runaway inflation?

I'm not sure, partly because it is impossible to know how many of the trillions of dollars in various bailout programs are being spent by the financial giants. If they are sitting on them as reserves - to weather the upcoming alt-a mortgage and commercial real estate meltdowns, credit default swap pay outs, and other financial hits - then the bailout dollars are not actually being put back in the economy, the money velocity is not increasing (i.e. dollars are not changing hands quickly), and inflation is still a ways off.

On the other hand, if those dollars are being spent anywhere in the economy, then the magnitude of dollars doled out by the government (and other governments) could quickly ignite runaway inflation.

Mish is my favorite writer continuing to argue for deflation . I think that Mish will be about a month late in calling inflation (since he was ahead of almost everyone in seeing deflation coming, and will probably not comment on inflation until it is a fait accompli). So if Mish even hints that we may start to see inflation, I'll make an immediate call for imminent hyperinflation.

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  1. If their is hyperinflation anytime soon it will be driven by Hedge Funds not demand. As long as demand stays deep in the toilet their won't be hyperinflation. If you look at oil prices right now, they are not being driven by demand, guess who.

    Ravi Batra says there will be inflation but not hyperinflation.

  2. The reason given for the forecasted hyperinflation, I believe, is the money supply and potential dollar collapse, rather than changes in market demand.


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