THEinflation can be seen on the horizon. Of course, the big comeback won't happen this year or even for a good part of next: in this period deflation will continue to dominate, or at least price growth close to zero. But if "in the past decade inflation lost all along the line, in the next the battle will be on equal terms". He writes it Alessandro Fugnoli, strategist of the investment company Kairos, in the latest issue of his column “The red and the black".
For the moment, the coronavirus emergency hasn't caused the surge in prices "feared by Kenneth Rogoff at the beginning of the crisis - explains the analyst - As much as the supply of products and services shrinks (for temporary or definitive closure of the business or for lower production), demand contracts even faster".
Ma when the epidemic will stop, the scenario will be different. In that moment the world 'will be more inflation-ready' than it was "after the Great Recession of 2008-2009", argues Fugnoli again, explaining that the reasons are mainly three.
First of all, compared to a decade ago “the strategy has changed: fully guaranteeing a large part of bank loans, governments and central banks induce commercial banks to lend without risk”, really increasing the inflow of liquidity to the real economy.
The second difference with respect to 2008-2009 that could trigger the return of inflation concerns fiscal policies: “Governments are ready to spend without taxing – continues Fugnoli – Those who are less so, such as in Europe, where even the fiscal response at the national level is already robust in France and Germany, will be more so when the dollar, in some time, begins to fall”.
Then, there is deglobalization, which has several meanings. It means "returning to continental or national production chains", a process that will increase safety, but also costs and therefore final prices. And it also means restoring borders and duties, with an associated reduction in immigration. All factors that favor inflation.
In any case, concludes Fugnoli, "if he returns, inflation will come slowly",
but from the point of view of investors it will be enough “to make people prefer a share of indexed securities in the bond portfolio and a non-symbolic presence of gold".
