If you’re worried about hyperinflation then I’ve got good news for you. This morning’s ISM report shows that fears of hyperinflation are substantially overblown. If you’ll recall back 3 or 4 months ago, the ISM’s prices paid component was surging into the mid-80’s. And this was one of the primary pieces of evidence that hyperinflationists were using to back their theory. But this morning’s ISM report showed a continuing collapse in prices. The latest reading of 59 is down a staggering 26.5 points from the highs of just 4 months ago. Clearly, the hyperinflationists need to rework their story. One of the respondents to the ISM report nicely summarized the current environment:
“Inflation pressures have finally slowed down.”
Some might say this is a bright spot. I beg to differ. The lack of inflation is due to a lack of demand in the economy. And that is always a bad thing. There are probably very few people who would rather have the Chinese disease of high inflation and high growth as opposed to being Japan who has suffered through meager growth and deflation for the last 20 years….Unfortunately, because we think we’re the next Greece, we are turning ourselves into the next Japan.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.