Email of the day on who takes the hit
I would be grateful if Mr Treacy could provide comment on which casualty will government and central banks choose
The way I see the situation now is:
Printing money to save banks = increasing inflation + sinking small people
Raising interest rates = reducing inflation + sinking banks + sinking small people with adjustable/variable mortgages
government and central banks caught in vicious circle of their own making
Which casualty will in Mr Treacy's opinion governments + central banks choose going forward?
Thank you for this question which may be of interest to other subscribers. The big question is about the permanence of inflationary pressures.
In your first scenario, the return of excessive money printing takes place before inflationary pressures are under control. That would greatly increase the scope for a wage price spiral and would result in significantly higher interest rates than are currently in place. The net result would be a complete repricing of asset prices and financial risk which equates to market crashes in stocks, bonds and property. That sinks everyone not just small people. In fact, the lease affected would be those with fewer assets.