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Breakingviews: The U.S. inflation threat

Friday, July 04, 2014 - 03:04

There’s an eerie 2007-style market calm as central banks smother volatility, says Breakingviews. But if the recent rise in U.S. inflation is more than a blip, history could easily repeat itself.

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The -- -- sitting at the lowest level in seven years old Marcus to quiet exists tranquility dangerous. We need now is at the -- sat at breaking views economics and it's not -- -- and what's hot does. -- the -- -- well it was last time in 2007. Which was the last time on the volatility indicators like the knicks were this slow on. The mixing it happened was everything went all wrong and we have a piece today by Ian Campbell. Saying that it looks like this could happen again. -- his argument in simple terms is that. As investors get more complacent they take more risks. As they take more risks the chances that things go wrong increase. And he plays all the blame on the central banks and all this liquidity that they've been pumping into the system that's right that's exactly right. I'm -- as is liquidity yields fall and that pushes investors it would take more risks to get higher yields and that's a bad thing basically. A dangerous thing. And what's happened and then in the US economy is strengthening. Unemployment is coming down. And then we'll -- inflation starts replacing disinflation. Well that's the theory on the Bank for International Settlements in the annual report Merrill curmudgeon Saturday space they have the right to say this they think. The markets are way out of on an economic reality here is a recovery in both Europe and -- in the US. And if it brings inflation is Ian suggests and now all of this is gonna go backwards. We have a lot of stuff about now how interest rates were never behind again that's the sort of news the new normal talk. And what's it could happen is that. That turned talk turns out to be just nonsense purity that one's been disappointing or that is disappointingly high inflation reading from the US. Capacity inning of a trend if disinflation which no one can explain his replacement inflation which -- can explain. -- rates will have to rise and and then all of this market complacency will turn well from complacency to panic. But there doesn't seem concerned that she sent. And I critics have we presently seeing and need to the ministry policy do not need the -- To deviate from -- army -- is -- -- price to busy and maximum employment issue behind the. I'm she may well be -- she's focusing on something that it doesn't look to me or the end like -- monetary policy can deal with which has long term structural unemployment in the US. So the longer she tries to push against the string the more likely she is to put so much money into the system that something drastic goes wrong. And so it is maybe she's not behind the curve so much -- on the wrong curve. Greg is thank you want to -- -- from breaking -- talking about how the column in the markets that -- seeing presently. Could be dangerous I'm inching along. This is what it is.

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Breakingviews: The U.S. inflation threat

Friday, July 04, 2014 - 03:04

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