Epic, unprecedented inflation

June 6th, 2007

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Today, the world is experiencing an unparalleled inflation of asset prices. This is the first time ever that the world is experiencing asset price inflation in all asset classes (e.g. property, bonds, commodities, stocks and even art!) and in all major nations (e.g. US, China, Japan, Australia, UK, Russia, etc). We will repeat this point again: never before had such a universal scale of asset price inflation ever happened in the entire history of humanity! Today, even artwork is also in a ?bull? market (if you consider artwork as an asset class)! As we said before in Have we escaped from the dangers of inflation?,

Today, the global spigot of is wide open, spewing out huge amounts of money and money substitutes into the [global] financial system.

All these inflation has its root in monetary inflation (a.k.a. ?printing? of money), which deranges economic calculations (see How is inflation sabotaging our ability to measure the value of things?) and causes mal-investments to build up in the economy (see The first step in an economic slowdown?mal-investment in capital). This opened up an unequalled boom (ever in history), which we believe will set the stage for an inevitable unequalled bust (see The real story behind the phenomena of booms and busts).

How much longer will the roaring global economy fly? We do not know the answer, for this boom may last longer than what we anticipated. However, please note that in the entire history of humanity, all bubbles (and we repeat, ALL) burst in the end. Thus, a global painful hangover will ensue?the greater the boom, the more painful the eventual bust. This is the theme that we had repeated many times.

Thus, do not be surprised if a second Great Depression were to strike. Just a few days before the Great Crash of 1929 (see The Great Crash of 1929), Irving Fisher, who was perhaps the first celebrity economist in America, made the famous prediction that ?Stock prices have reached what looks like a permanently high plateau.?

Today, many people are believing the same thing.