The funny thing is, it is possible that deflation has already been whipped. We are starting to see signs of inflation in the pipeline.
The Fed is dumb but not unintelligent, if that makes any sense. They have 250 economists crunching numbers. They know when inflation is coming. Why do you think they wanted to raise rates four times this year?
Because of stuff like this:
Source: DB
As you can see, wage expectations are starting to pick up. No surprise, after we heard about all of those minimum wage hikes last year—as usual, the market is self-correcting. Low wages is the cure for low wages. The market just doesn’t operate on anybody’s schedule.
We could see inflation of 3-4% in a couple of years. Now, even the most novice investor can understand that owning a bond with a negative yield in a high inflation environment is the most nonsensical thing ever.
What I am saying is that the bond market is sowing the seeds of its own destruction. It is a bubble. High bond prices will be the cure for high bond prices, when the market gets around to it.
Of course, if you like inflation, then you like gold:
