The idea that the recent bout of inflation will recede into the rearview mirror by 2024 could prove fanciful, according to a legendary asset manager who saw hyperinflation firsthand when he ran Yale University’s endowment in the 1970s.

Loomis Sayles vice chairman Dan Fuss believes the global economy could witness something of a replay of the 1970s, albeit with some key differences and without the extreme double-digit acceleration in prices. “Almost every cost has gone up,” he said.

Oil prices were the main driver of inflation in the 1970s. This time the drivers are far more dispersed, he said. Labor tops the list.

“We’re looking at a movement of people and a shortage of people,” Fuss said. Some people who are moving don’t have the necessary skill set for jobs that are available.

In west Boston and its suburbs, there is a shortage of barbers and “a lot of jobs like that,” he said. Some people who have the technical skills lack the language skills, he added.

Two universal concerns, in his view, remain climate change and the shortage and migration movements of people. These are interconnected, as climate change makes more of the world uninhabitable, and will eventually force huge shifts in population, he said.

Fuss envisions an inflationary decade that plays out over two or three cycles, with the current cycle ending in a year or two with inflation bottoming out at 3% or 4%. That could be followed by another cycle with inflation falling to 4% or 5% in the middle of the decade. Finally, there could be a final cycle he calls “the crunch” around 2030, though admits it’s “all guesswork,” he said.

What isn’t speculation is that the global economy has moved from a decade of weak demand from 2009 to 2020 to an era of insufficient supply. Shortages of labor and commodities aren’t likely to disappear anytime soon.

But the biggest threat to global inflation and overall stability is the looming showdown between the world’s two superpowers, America and China, he said. Fuss described it a Thucydides trap, the historic tendency of an emerging power to seek to displace an established power dating back to Sparta’s defeat of Athens in ancient Greece. The most recent incident occurred with the Cuban Missile Crisis in 1962 and was resolved peacefully.

These encounters typically happen when “two parties are caught in a situation and no matter what they do” every action each party takes brings them “closer to a clash,” he said, speaking at a virtual event sponsored by Financial Advisor and The Money Show earlier this week.

The legendary bond fund manager has been warning about this for nearly a decade. In light of recent events, his warnings seem a lot more real, even if their inflation implications are only starting to surface.

Fuss said these fears are increasingly apparent in the financial markets as money continues to flee Asia for the Western Hemisphere, notably North and South America. If you are a wealthy businessman in Southeast Asia, do you want all your investments “standing in the way?” Fuss asked.

It’s “no wonder emerging markets have been weaker than fundamentals would suggest,” he said. But while global investors have been focused on Russia’s war with Ukraine, the U.S.-China relationship provides another illustration of why caution is warranted in portfolio construction and design.

At present, China’s ham-fisted management of Covid and its refusal to use superior Western vaccines have forced it to re-impose lockdowns of its citizenry, threatening its political stability. While the rest of the world wrestles with inflation, China is still experiencing deflation. But if the world’s most populous nation can manage to extricate itself from Covid in 2023, its reopening is likely to trigger another wave of global inflation just when other nations are hoping to finally tame it, he said.

Meanwhile, the first round of post-pandemic inflation has taken hold and much of it is already baked in, Fuss said. In the western world, most workers have received 3% or 4% wage increases, but their cost of living has climbed 8% or 10%, translating into a 5% reduction in living standards.

Worker dissatisfaction is global and ubiquitous. America and Europe may not be experiencing the violence that Foxconn facilities are seeing in China, but the unionization movement at Amazon, Starbucks is displaying labor power in America for the first time in 50 years. Although layoffs are beginning to appear in America, Fuss believes that as key parts of the supply chain return to North America, chronic unemployment is not going to be a problem here.

It could be different in China, however. The violence among Foxconn workers and state police is giving Apple a black eye, he noted.

It’s likely to only encourage them to shift more production out of China. Other manufacturers were already making moves to “near-shore” or “friend-shore” manufacturing facilities away from China, even if it means accepting higher costs, he said. The ramifications for global inflation are only beginning to play out.

What really worries the top brass in China’s Communist Party (CCP) “is that these Foxconn jobs are good jobs,” Fuss said. Providing continual increases in living standards is the key instrument with which Xi Jinping and the Communist Party have retained their legitimacy in the eyes of the populace. If good jobs leave China, that could change

Fuss takes some degree of comfort from what appears to be a decent relationship between President Joe Biden and the Chinese leaders. But he regards efforts by American politicians to inflame the simmering tensions between China and Taiwan as reckless.

House Speaker Nancy Pelosi’s visit to Taipei last summer was “damaging” and “dumb,” he said. Were Rep. Kevin McCarthy, expected to be Pelosi’s successor, to follow through and visit the thriving island, it would be “even more damaging” because it would indicate to the CCP leadership that American support for Taiwan’s independence is bipartisan.

Ordinary citizens in Taiwan and America may cheer Pelosi—even McCarthy applauded her visit. But what plays in Peoria and among many refugees of the 1949 Communist takeover of the mainland could prove disatrous. Fuss, who knew the founder of the world’s largest chip maker, Taiwan Semiconductor, said the Taiwanese business community strongly disapproves of American politicians seeking to pander to their fellow citizens and sympathizers.

“All it does is make it more likely we end up in a shooting war [with China],” Fuss said. Needless to say, a shooting war between the U.S. and China would inflict far more damage on the world economy than the current Russian-Ukraine war.

Fuss noted that the power bloc Xi Jinping derives his strongest political support from is the Chinese military. If he loses support among other major special interest groups, it’s likely to make him more reliant on them. And they’ve been practicing an invasion of the island for decades. Some in the Chinese military probably are getting bored with drills.

There are numerous military actions China could take without initiating an all-out shooting war, Fuss observed. One obvious move would be a naval blockade. “They could also cut the cables,” he said.

Given that 50% of global trade moves through the South China Sea, it’s difficult to underestimate what this kind of confrontation would mean for the world economy. And it could happen without any party firing a single shot, he said.