The Great Reflation: How Investors Can Profit from the New World of Money

Introduction

The U.S. government has thrown an avalanche of new money into the economy and the financial system. This is the Great Reflation, and its purpose is to pump new life into the economy after a near-death experience. The biggest financial crisis and recession since the 1930s created a black hole that was huge and frightening. It was caused by an implosion of the greatest credit and asset bubble in history, which nearly brought down the global banking system. The effort to reflate—pump air back into the balloon—has had to be on a scale at least as large as the bubble itself. It is an experiment never before attempted in the context of U.S. experience, and it will have consequences unlike anything seen before.

The purpose of this book is to help investors understand the new investment world we live in, what is likely to happen in the future, and how to profit from this new world of money. It is both a guide and a framework to help investors understand and navigate through all the complexities of an unstable, inflation-prone world.

No one knows exactly where the Great Reflation is going, what is going to happen, and what the end point will be like. However, there are some things we do know. When new money is created on a grand scale, it must go somewhere and have some major consequences. One of these will be greatly increased volatility and instability in the economy and financial system compared with the roller coaster ride of the past 15 years when the credit bubble was forming. ...