Current Macroenvironment – Financial Repression or Inflation
We are of the view that all preconditions for a Financial Repression Scenario and a Hyperinflation Scenario are met.
1. Deficit Spending exceeding Critical Threshold – Hyperinflation
2. Quantitative Easing – Increasing Balance Sheets of CBs and Low Interest Rates
3. Development of M2 Money Stock versus M2 Velocity
4. Debt Crisis – Sovereign debt levels of main GDP contributors (USA + China + EU19 + Japan) show steady increase. Effectiveness of debt increase is declining.
5. Asset Price Inflation – Stock markets at all time highs are viewed to be overvalued. When do Gold mining stocks catch up?