This would help Peter Schiff recover from his recent losses… A pair of Morgan Stanley analysts Jocahcim Fels and Spyros Andreopoulos say you can’t just dismiss the possibility of hyperinflation in the US. What’s scary is that while they see it as a longshot, the scenario under which it could occur doesn’t sound that crazy.
FT Alphaville: Firstly, the rapid expansion of the monetary base by the Fed, ECB and BoE would have to continue and feed into a more rapid and sustained expansion of money in the hands of the general public.
Secondly, Morgan Stanley says governments would have to face difficulties financing their bailout packages and funding their debt.
Lastly, public confidence in the government’s ability to service debt without resorting to the printing press would have to disappear, as well as the government’s actual ability to withstand the pressure to do so in the first place.
Fels and Andreopoulos recommend investors buy insurance against this type of “Black Swan”, which they regard as cheap. One quibble: This doesn’t sound like a Black Swan at all, since the logic and scenario is so easy to see coming. Sure it may be a longshot, but one easily reachable from our current scenario.
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